Suzuki Motor Corporation.

Suzuki Motor Corporation.[Type the document subtitle]

4/15/2014

Executive SummarySuzuki Motor Corporation is Japan's fourth largest automotive company, marketing its vehicles around the world. Suzuki is best known in the United States as a manufacturer of small, fuel-efficient vehicles, as well as a range of motorcycles and recreational vehicles. They are known for using a low-cost strategy, relying on high volume sales to drive their profits. As a result they have failed to build brand recognition within North America due to lack on marketing efforts in these regions. Although Suzukis global strategy worked in Asian markets, such as India and China, it ultimately failed in the North American market. Suzuki failed to fine-tune their product offerings to fit the needs of the North American consumer. In North America Suzuki had bad leadership, limited dealer network, outdated vehicles and lack of marketing plan. Recommendations for Suzukis future operations are based on both the SWOT and Porters 5 forces analysis, as well as, the pressures for change discussed in the text. Our first recommendation suggests that Suzuki focus its efforts in automobile sales towards emerging economies of China and India. Our second recommendation suggests that Suzuki continue to sell automobiles in North America by establishing a fully owned production facility for their vehicles. Ultimately upon initial implementation this type of strategy will require the company to switch from its current global strategy to a multi domestic broad differentiation strategy. This shift will allow for Suzuki to properly identify the differences between market segmentations within each country and create products and services that are tailored to local markets. In doing so they create a foundation to rebuild their brand to a place where it rivals the success of Maruti Suzuki (India Division) along with Japanese competitors like Honda, Toyota and Yamaha. ContentsIntroduction3Porters 5 Forces Analysis4SWOT Analysis5Strength5Weakness6Opportunity7Threats8Reasons for Change9Recommendation9Implementation plan10Appendix A : Porters 5 Forces Analysis12Appendix B : SWOT Analysis14References15

IntroductionThe Suzuki Company was founded by Michio Suzuki on October 1909. As time passed, Suzuki realized that if they wanted to stay in business they would need to diversify [their products] (Suzuki Brand History, 2014, para. 1). The company decided to turn to car making, taking a different approach than their main competitor Toyota. Suzuki would create a unique model of car instead of replicating the American six-cylinder engine like Toyota did. Unlike their competitors, Michio Suzuki made this decision because he wanted to make a one-of-a-kind car that would diversify itself from the competition. He developed several prototypes that were, based on four-cylinder engines [with] liquid cooling system[s] (Suzuki Brand History, 2014, para. 3), ultimately never launched. The company turned to putting engines onto bicycles. This captured the attention of the government who granted funds to Suzuki for research. After they launched their first motorized bike, it became obvious that the motorcycle industry was more attractive, so Suzuki changed their name to Suzuki Motor Co., (Suzuki Brand History, 2014). Even though the motorcycle industry was their main focus, Suzuki launched their first lightweight vehicle in 1955 (Take a few, 2014). Although Suzuki was a successful, they were having problems in expanding into other markets, they decided to open a new subsidiary in Los Angeles in hopes that [it would] reach new consumers in the United States [automotive market] (Take a few, 2014, para. 7). As the 80s came around and with many vehicles released, the company managed to establish new offices and R&D centers in multiple locations, including India, France, Spain and Colombia. Moreover, Suzuki signed important agreements with General Motors Corp and Isuzu Motors in 1981 to drive their North American sales Today Suzuki has 120 distributors in 191 countries (Take a few, 2014). Suzukis global strategy had a centralized management structure where all global operations were controlled in Japan. They use a low-cost strategy where they sell cheaper cars in all of their markets also they do not spend much on marketing. Also they use a standardized strategy where they sell cars that are similar in every market; meaning that you will see the same Suzuki car in Canada and United Kingdom. Although these global strategies worked in the other Asian markets, such as India and China, it ultimately failed in the North American Markets. Suzuki failed to change their ways of operations to fit the taste of the North American Markets. The American Suzuki Motor Corporation (ASMC) had an ill-conceived retailing plan, bad leadership, [limited] dealer network, outdated vehicles and lack of marketing funds (Radu, 2012, para. 7).The reason for the bad leadership and limited dealer network was because the North American stores were being controlled in Japan. The reason for their outdated vehicle is that they stuck with their standardized strategy. They lacked the understanding of other countries having different tastes. The reason for the ill retailing plan and lack of marketing funds was they were using a low cost strategy. They probably thought that by selling standardized cheap cars would be enough to capture the North American markets. We think that if Suzuki wants to stay in the North American market, they need to change their operations to be more locally responsive to consumer demands. Porters 5 Forces AnalysisSuzuki is a parent company that operates in multiple different product/market segments. In order to fully understand the environment in which they operate our firm undertook an analysis using the Porters Five Forces model. Porters Five Forces analyses the attractiveness of an industry or market segment based on: the threat from new entrants and substitutes; the bargaining power of buyers and suppliers; as well as the existing competitors within the market. For purposes of this analysis we separated Suzukis market segments based on product, automotive or recreational vehicle, and on the location of the market, Asian and North American. This separation resulted in the analysis of four key markets, the details of which are attached in Appendix A. The results of the analysis ranked the attractiveness of the markets from most to least attractive as follows: Asian Recreational Vehicle, Asian Automotive, North American Recreational Vehicle, and lastly North American Automotive. This illustrates the strength of Suzukis brand in both the Asian region, and the small engine segment, a result of their commitment to quality and performance. This strong brand image is augmented by lower competitive pressures from existing firms within Asian, and growing disposable income within the emerging markets of the region. The firms historical success in small engine development has helped create a competitive edge within all markets except the North American Automotive Industry where the preference is towards larger more powerful engines. Although the highly competitive nature of the North American Automotive market has made it unattractive and caused Suzuki to recess from it in recent times it must be noted that it is the second largest market in terms of units and the largest in terms in revenues; creating an opportunity to realize higher margins the Suzuki currently is achieving.SWOT Suzuki is a large company engaged in global operations, all of which can be affected by both internal and external factors. The SWOT analysis focuses on the internal strengths and weaknesses, as well as, the external opportunities and threats. Please refer to appendix B for an illustration of Suzukis SWOT diagram. The purpose of this analysis is to explore internal and external factors to Suzuki that affected their performance in the North American automotive market. StrengthJapan is known for the unpredicted quality of their vehicles. One of the primary, abundant resources in japan is their human intellectual power. This resource fosters a large degree of R&D primarily in automotive and electronics technology. The Motor Industry of Japan (2013) is a market report compiled by The Japan Automobile Manufacturers Association, Inc. It states that 20.7% of the countrys total R&D went into the automobile industry. Industries related to automotive such as iron & steel, as well as electronic parts and circuits both collectively offer 8.1% of the countrys total R&D. together the R&D of the automobile industry paired with the supporting industries is 28.8%, making up a significant part of Japanese research and development operations. Furthermore this shows japans commitment to producing the highest of quality vehicles. In addition Suzuki Motor Corporation is a company that has diversified its product offerings, producing everything from motorcycles, cars, ATVs, small engines and also marine engines. The application of Suzukis standardized products in North America was successful in the small engine, ATV, marine and motorcycle segments. The size and scale of Suzuki Motor Corporation gives them a solid financial foundation in order to expand their operations once again to the North American market. They are the second largest consumer market for automobiles in the world boasting some of the highest profit margins per vehicle. Over the next five years the size and scale of Suzuki motor co will give them the ability to raise their annual capital expenditures to 200.5 billion yen. This is a significant increase from 120 billion yen in the past 5 years. Suzuki Motor Corporation states The investment will help expand [and foster global] manufacturing (Hagiwara & Jie, 2012, para. 20). The facts all point towards Suzuki Motor Corporation size, paired with its subsidiarys and success overseas builds a new foundation for global expansion. WeaknessThe reason for the poor retailer network and lack of marketing funds was due to their low cost strategy. Suzukis strategy was based upon the belief that by selling standardized, cheap cars would be enough to capture the North American consumer. The fact the Suzuki had no production network in North America forced them to export a large portion of their product from Japan. Their poor retailer network and lack of marketing was due to the companys centralized management approach, making all its decisions from headquarters in Japan. Suzuki had no corporate presence in North America to accurately forecast marketing trends and establish relationships with reputable dealers, leaving their market share to be eaten by the competition. Due to Suzukis un-positioning strategy dealerships that sold Suzuki were forced to market the same vehicle to different consumer segments, making it difficult for the salesmen to emphasize upon one particular need of the buyer. Furthermore, leading to a decrease in sales because the difficulty that dealerships had selling Suzuki products. The ASMC had low price margins, low priced cars with small sales volume, which lead them to poor brand building and bankruptcy in the North American automotive market. The strategy when marketing the Suzuki Samurai was to position it without a niche. Suzuki believed that this way each consumer could define the product and rationalize their purchase in their own way. The Suzuki Samurai suffered a dilution of its purpose as a result of un-positioning the product in the North American market. This caused confusion for consumers if the Samurai was really the right product for them. The North American automobile market is much more visible to consumers than the motorcycle/utility vehicle market. The companys image of producing high quality, high performance products is diluted against the failure of Suzuki automobile sector. (REFFF)Historically Suzuki has always been focused on a global strategy, emphasizing central coordination and control of international operations. The challenge was for Suzukis management to effectively coordinate the activities of their widely dispersed international operations. The Asia and European markets are relatively similar to each other in terms of consumer trends. However, the North American market is unique and makes up the second largest consumer market for automobiles globally. OpportunitySuzukis emphasis on engineering fuel-efficient vehicles has the opportunity pay off due to increasing fuel prices and changing consumer trends. The market for such cars globally was $33 billion in 2010. Suzukis focus on small and fuel efficient engines is a great opportunity to capture new market share. An article by Jeff Bartlett (2009) of Consumer Reports.org explains a survey Conducted by the Consumer Federation of America (CFA) showing that Americans want more fuel efficient vehicles. The increases in gas prices are driving consumers to change their purchasing behaviours away from big and powerful to small and fuel efficient. Business Trends (2009) asked consumers what they would be most likely to compromise in their next new-vehicle purchase in order to save money they might need to spend on fuel. The most common item on the list to be sacrificed was engine size, closely followed by vehicle size. North American automotive trends are changing to mimic that of Europe and Asia. In the big picture this is good because it will reduce the amount of harm we are doing to the globe and it will place more disposable income into consumers pockets.The size of the American automotive industry makes it an attractive market to be in as it grew 6.9% in 2013, making it second largest automobile market in the world (OICA, 2013). Suzuki should consider producing their vehicles in North America exclusively under their control and to their production standards. This type of strategy will require the company to switch from its current global strategy to a multi domestic broad differentiation strategy. This shift will allow for Suzuki to properly identify the differences between market segmentations within each country and create different products and services that are tailored to local markets.Suzukis field operations rely on Actuate inventory reports to understand dealers floor plans, inventory types, inventory quantities and sales information. Suzuki uses Actuate applications for financial analysis to measure profitability by combining sales with financial data. This financial analysis enables managers to measure if they are meeting gross profit targets by dealership and product line (Lynch, 2007). Suziki has access to the resources required for gathering and assessing new markets .However, they have to establish a local presence in order to clearly see and understand the market beyond what is written on paper this is necessary for Suzuki to do if they wish to re-enter the North American market with local responsiveness allowing them to properly brand themselves in a way the delivers the value of the Suzuki. ThreatsThe governments currency intervention on August 4 was the third time in less than a year that the Japanese government moved to address the strong Yen. A continuing surge in the Yen makes Japans key export sector less competitive abroad. A 10 per cent rise in the Yen takes away as much as 18 per cent of profits by Japanese manufacturers such as Suzuki, Honda, Toyota and Yamaha (Panda,2012, para. 8). There is a very competitive market in North America for automobiles due to the mixture of both domestic and foreign brand that are already established in the market. The entry barriers into the industry will be high due to the degree of differentiation and diversity among other substitutes already available in the market. The threat of substitution is high, due to Japanese manufacturers like Honda, Toyota and Yamaha already present in the market. Suzuki will have to expel a large amount of capital upfront in order to enter the North American market.Suzuki has already seen their reputation in the automobile sector fall when it was alleged that their vehicles were unsafe when am American women died from a Samurai flipping over. This incident had left a permanent scar on Suzukis image, labeling the brand as being low quality and unsafe. Safety is number one when it comes to building cars and advertising their safety increases their value. In the automobile industry consumers are highly concerned with safety. If the vehicle is not safe or perceived as not safe then the company puts its reputation at risk along with its market share.Reasons for ChangeBasde on the sales numbers of 2012, Suzuki sold roughly 5,500 vehicles in Canada (Deveau, 2013), which has consistently declined since the recovery from the recession. Compared to big competition in the automotive industry, Ford sold 284,000 cars, while the Japanese automaker Toyota sold 195,000 vehicles in Canada (CTV News, 2014). Base on this statistic, Suzuki sold only 1.9% of the amount Ford sold, which is far too little to generate substantial profit for Suzuki in the North American sector. One of the big problems with Suzuki is that they did not do a thorough research to know what North Americans wanted in their automobile, at the same time; Suzuki was moving small volume of units annually at a low profit margin. Berkowitz (2012) states Suzukis retail system was a proper mess. Low-profit-margin products and small sales didnt always attract high-quality dealer managers and sales staff, which in turn turned off many customers.Due to the high uncertainty of the road conditions in Central Canada, North Americans prefer a bigger vehicle that could comfortably adapt to the changes of the road conditions. Maciamo (n.d.) states European cars are very different in style than their American counterparts. American cars tend to be more massive and squarer, because size matters in the States. All four Suzuki models sold in Canada are small, all with the same 2.4 liter 4 cylinder engine. The only exception is the SX4 model which offers a 2.0 liter 4 cylinder engines producing slightly less power. In the North American market when the roads are much wider than in Europe and Asia, it increases the want of a bigger vehicle. North Americans also enjoy vehicles that have good torque capability especially for households who tow trailers and boats. The Grand Vitara has the highest towing capacity in the Suzuki line at 3000lbs, which is less than its direct competitors Kia V6 Sorrento which could tow 3500lbs. Suzukis product lineup required to be extended and updated but chose to stay stagnant and took little action during the times of the recession (Deveau, 2013). This allowed new entrants such as Hyundai and Kia to expand greatly in North America as these automakers consistently expanded and updated their product line during the recovery period. Another big problem that associated with the downfall of Suzuki was their online website, which is a frustrating website for consumers to gather information from. Competitors websites such as BMW or Mercedes-Benz have an integrated system which allows customers to customize the vehicle the way he or she wants. These customizable features include color of the exterior, interior, leather seats, navigation, sport package, etc. These websites also presents an in depth specification of all the mechanical parts such as torque, horsepower, drivetrain, number of seats, heated seats, etc. Take Mercedes-Benz for example, if a customer wants to choose the C class model, they can select from the C250 model (2.5L) up to the C63 AMG model (6.2L) with a wide variety of optional features to choose from. Compared to Suzukis webpage, they have a website that does not show the specification of the vehicles, therefore customers have no choice of what they can purchase. For example, if a customer wants to purchase the Grand Vitara, there is no option of selecting whether they want the inline 4 or the V6 model. The separation between Suzuki North America and Maruti Suzuki is also a huge issue, as Maruti Suzuki sells a much wider range of product line with a much more attractive styling. Maruti Suzukis webpage is well developed with the ability to view vehicles in 360 degree views and a brief technical specification of their lineup. Currently, the bestselling car from Suzuki is the newly redesigned Suzuki Swift, which is currently listed in the top 100 of the best selling cars worldwide. The newly redesigned Suzuki Swift is not sold in the North American market, which is another big downfall for Suzuki.Pressures for ChangeHyper competition pressureHyper competition, occurs when technologies or offerings are so consistent that profits resulting from any competitive advantages cannot be sustained for the long-term. A report by Tian Ying (2010) in Bloomberg news showcases the United States as the second largest auto market in the world. There are over 20 automobile companies competing in the North America market. In 2013, The American Companies, General Motor, Ford, and Chrysler already own about 45% of the market (The U.S. Market, 2014). The three largest Japanese automakers: Toyota, Honda and Nissan get about 30% of the market. These six companies already own 75% of the market share in the America market (The U.S. Market, 2014). The remaining 25% of market share is shared between more than 10 companies. With so many competitors in this industry, Suzuki would have to differentiate its products in a way that makes then unique to the consumer.Mandated pressureVehicle Fuel Economy and Greenhouse Gas Emissions Standards were established in the United States to mandate more fuel efficient cars and a reduction in greenhouse gas emissions (Vlasic, 2012). All the vehicles sold in US must meet the fuel economy and emission standards set by the U.S. government. The goal that United States tries to achieve is 35.5 miles per gallon by 2016, and 54.5 miles per gallon for the 2025 model year (Vlasic, 2012). This gives lots of pressure to Suzuki if they wish to re-enter the North America market. Reputation and credibility pressureCorporate social responsibility (CSR) can generate a profit by looking after and rewarding the community in which it operates. These types of actions are done to boost the firms reputation and creditability to a level that makes them competitive. Under the observation of Best and worst in brand perception, Suzuki has 7th worst brand reputation in the whole world (Consumer Reports, 2012). Compare to other Japanese auto maker, Suzuki has a comparably low score (Consumer Reports, 2012). Toyota scored 131 and Suzuki just got 11. Low global brand reorganization is not favorable for Suzuki to do international expansion or increasing sales worldwide. Also, Suzuki is not listed at the top five in other categories like safety, quality, value, performance, green, style, and technology (Consumer Reports, 2012). Suzuki is doing all it can to rebuild their reputation and creditability. They continuously provide after sales services to the North Americans Suzuki owners honoring warranty contract regardless of the fact that they no longer have a presence in the North American market.RecommendationBased on analysis of Suzuki using both SWOT and PORTERs models as analytical tools as well as the pressures for change discussed in the text, our group has decided on two different alternatives we believe can potentially benefit Suzukis future growth in the North American market.Our first recommendation is for Suzuki to completely shut down North America operations and focus its efforts on its Asian markets. Suzuki would pursue this strategy to focus on its successful Asian markets, while lowering their risks in floundering North American segment. In doing so they would focus on a market where they possess a sustainable competitive advantage related to their strong brand image, and low cost leadership. Our second recommendation suggests that Suzuki continue to sell automotive and recreational products in North America. This type of strategy will require the company to switch from its current global strategy to a multi domestic broad differentiation strategy. This shift will allow for Suzuki to properly identify the differences between market segmentations within each country and create products and services that are tailored to local markets. Its current global strategy has proven to be ineffective as it does not take into account the individuality of each nation because of the use of standardized throughout all national markets. Following this recommendation allows for Suzuki to yield higher revenues as a result of higher margins in the auto industry compared to motorcycles and ATVs. By modifying their current product line to create vehicles better suited to North American living as well as increasing brand recognition we believe Suzuki can return as a solid foreign competitor in the automotive industry. Implementation planMarket Research/ NA design team what customers want, experienced designers, customized product, consulting firm Production Facility Wholly owned Where No bias b/t Canada, America advn in Canada (grants), America (Detroit), Mexico ( LC Labour)New Vehicles - Wider range, More customizable, larger, climate friendlyDealerships establish dealers in major cities then consider espansion, hub and spoke modelMarketing Campaign commercials, billboards, brand exposure, website (based on Maruti)Competitive advantage - low cost structure with a high degree of customization.

Appendix A : Porters 5 Forces AnalysisNorth American Automotive Market

Overall market attractiveness = 5.6/10Asian Automotive Market

Overall market attractiveness = 4.4/10North American Recreational Vehicle Market

Overall market attractiveness = 5.4/10Asian Recreational Vehicle Market

Overall market attractiveness = 4.4/10Appendix B : SWOT Analysis

Strengths: Japanese technology Diversified operations Strength of motorcycle division Size and scale of Suzuki Motor CorporationWeaknesses: Poor retailer network and lack of marketing Un-positioning strategy Brand building Global strategy Centralized management

Opportunities: Increase in fuel prices Multi domestic strategy focusing on broad differentiation Size of the North American car market

Threats: Market rivalry Product substitution Consumer trends Bad reputation in the North American automotive segment

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