The Proposed Short Term Marketing Strategy for Audi South Africa Focusing on Distribution and After Sales

THE PROPOSED SHORT TERM MARKETING STRATEGY FOR AUDI SOUTH AFRICA FOCUSING ON DISTRIBUTION AND AFTER SALES BY WIM VAN SCHIE STUDENT NO: 8418314 SUBMITTED AS PARTIAL FULFILMENT FOR THE REQUIREMENTS OF THE DEGREE M (TECH) BUSINESS ADMINISTRATION IN THE FACULTY OF BUSINESS MANAGEMENT TECHNIKON WITWATERSRAND SUPERVISOR: Dr R. Van Der Wal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he motor industry in South Africa, (SA), is experiencing a period of turmoil that will result in its complete restructure. The globalisation of the industry and the involvement of government with the Motor Industry Development Programme, (MIDP), is forcing the development of strategies that are formulated to equip the local manufacturers to become globally competitive. The MIDP has had a major influence on the development of the industry since 1994, as it has allowed the entrance of new competitors into SA due to the gradual reduction in import tariffs. It also proposes to stimulate the export potential within the industry of vehicles and components by offering a rebate structure with which the manufacturers can offset import duty. It will also force a consolidation of the industry in that amongst others there is more co-operation between vehicle and component manufacturers. A financial consideration of the MIDP is to reduce the industry's use of forex. The historical background of the industry in South Africa shows a rather proud and colourful past, with most of the major players in the international motor industry having been represented locally at one stage or another. With the disinvestment campaign that preceded the new government, found a core of manufacturers remaining and competing in a fairly 'flat' market. However that has all changed, and although there is no immediate substantial market growth in sight, the influx of new competitors continues, making the market complicated and competitive. Audi itself has only been represented on the SA market from 1968, however as no focused marketing strategy was developed for it, it never really was in the same league as BMW and Mercedes Benz. In 1994 this all changed as VWSA decided to introduce Audi onto the market competing in all premium market segments. What followed was a focused marketing strategy, which required a separate dealer network and Audi specific staff. The process of selecting dealers was based on market potential and also on the established infrastructure. The new dealer network then started to undergo the process Iv of conforming to the external corporate identity, CI, requirements, and this should be completed by mid 2001. In the assessment of the external environment, it was seen that the recent negative economic activity in Asia and more recently Brazil had a huge affect on the motor industry during 1998. The high interest rates that were introduced as part of a programme to protect the value of the Rand, prevented the market from developing to its full potential, while the gradual improvement of the financial markets during 1999 the scene was set for a slow recovery. As the international markets stabilised so did the pressure on the currency, and a gradual relaxing of the strict fiscal controls began. The short term outlook on the economic front looks positive, if all market indicators remain stable, and with the prospect of inflation remaining low. Social issues were still seen as having a possible impact on the industry, as high unemployment, the resulting crime wave and the inflexibility of the labour market were considered factors preventing potential meaningful investment. Analysis of the market share of the B, C and D market segments in 1999 showed Audi to be well behind its major rivals BMW and MB. The A4 generally followed the market trend in 3rd place, seemly unable to break the stalemate. The A6 did not manage the penetration hoped for in 1999, however it was seen as poor supply in the first quarter that influenced least the 1st half of the years performance. The A8 performance was well below expectations, and a serious re-look at the sales strategy is needed including the effectiveness of the A8 specialist dealer concept. The entrance of potential competitors was identified, as there is a overproduction of vehicles in the world, and manufacturers will price their product competitively in order to, firstly move stock, and secondly to buy market share. The competitive advantage that Audi SA presently enjoys with regards to established distribution and dealer network will disappear, as these newcomers will be 'piggy backing' on established dealer networks to accelerate their market penetration. The examples used were Volvo having access to the Ford dealer network, and Alfa Romeo to the Nissan Dealer network and so on. The low growth in the SA market is a driving force behind local manufacturers to become more globally competitive so that they can utilise their production capacity, and export product. This obviously is dependent on the development of the MIDP programme together with the government. A simple SWOT analysis indicated that Audi SA found itself in a strong competitive market, and suggests that a defensive and consolidation strategy be considered. However it must be borne in mind that together with a consolidation of its position in the market place as a defensive measure, Audi SA needs to offer product positioned in the market place that will enhance its image, and provide the customer with a quality alternative package.

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