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Paper instructions:Using the case study, answer the questions below in a single essay format.
Prolonged success for auto manufacturers is likely to come from their ability to sell cars in rapidly developing countries like Russia, Brazil, India, and Indonesia. However, selling cars in these emerging markets can be complicated, especially for foreign companies. Nissan is one company that has struggled to expand into emerging markets: its overall share of auto sales is 6%, but its share in Brazil is just 1.2%. With the goal of increasing its global reach, Nissan announced it would revive the Datsun brand name, and develop six new vehicles specifically designed for emerging markets’ growing middle classes. The company aimed to produce modern, stylish cars that appeal to consumers visually, and more importantly, fit into their budgets.
In bringing back the Datsun brand, Nissan in effect created a distinctive identity for the unique set of cars that comprised its new global venture. The emerging middle class wants cars, but it can’t afford to spend $15,000 to $20,000 on a family sedan. Thus, automobile companies like Nissan need to create small, extremely affordable cars; to do so, they must often take a bare bones approach. That means no air conditioning, no passenger air bags, and no power windows. While Datsun will provide entry into the market, the Nissan brand will continue to be sold as upscale, feature-rich cars. Per Ammar Master, an analyst at LMC Automotive in Bangkok, “Datsun could bring in volumes at the lower end of the market…While the Nissan brand will continue to move upmarket.”
Dawson, C. (2012, October 02). For Datsun revival, Nissan gambles on $3000 model.
Fox News Auto. Retrieved from http://www.foxnews.com/auto/2012/10/02/for-datsun
Siddharth, P., Mukai, A., & Hagiwara, Y. (2012, March 21). Nissan revives Datsun after
three decades to boost sales. NewsmaxFinance. Retrieved from
Winter, C. (2012, March 21). Behind the birth, death, and rebirth of Datsun, Bloomberg
Businessweek. Retrieved from www.businessweek.com/articles/2012-03-21/behind
Case Study Questions
a.) Name and describe two external environmental factors Nissan must consider as it enters into rapidly developing countries like Russia, Brazil, India, and Indonesia. Use facts from the case as examples.
b.) Briefly define the following product decisions: one product, one message; product invention; and product adaptation. Which product decision did Nissan utilize when it developed six new Datsun models for emerging markets’ growing middle classes? Explain your reasoning.
c.) Suppose that, instead of developing its Datsun line for emerging markets, Nissan simply sold its existing models in those markets for half their original price.
i.) State the term used for this practice, and explain why it is regarded as a form of price discrimination.
ii.)Discuss why Nissan might choose this approach.
iii.)Do you think it would be successful? Why or why not?
With the recent growth in technology and globalization, it has become a norm for companies to consider taking their products to markets outside their countries especially to the developing economies. But in most cases, not all the markets are competent or attractive enough to pursue meaning that companies should always be careful in selecting the market in which it will succeed. Being the second largest car manufacturer in Japan, Nissan feels that it is time for it to revive its Datsun brand and introduce it to the developing markets especially India, Indonesia and Russia and this decision has been made after three decades of Datsun being out of market. As of 2014, Nissan was getting 21 percent of its revenue from Japan and 33% from North America (Siddharth, Mukai, & Hagiwara, 2012). However, introduction of the brand in India will expose the company to competition with other best car selling such as Toyota Motor Corp. and Maruti Suzuki that is also located in India. For Indonesian market, Nissan is expected to face competition from LMC Automotive that is located in Bangkok. Stiff competition will also be coupled with pricing challenge. For instance, while Nissan Micra compact hatchback retails at 421,765 Indian rupees, the best selling Maruti car costs 240,353 Rupees and at the same time, Hyundai’s best car is 269,999 Rupee (Siddharth, Mukai, & Hagiwara, 2012).
In product decisions, one product, also known as a homogenous product, is one that can hardly be differentiated from other alternatives in the market. Such products usually have the same features and quality standards as goods from other producers and are usually easily substituted due to their similar purposes and utilities. The primary determinant of a consumer’s purchasing decision is price. On the other hand, one message denotes the tendency of manufacturers to produce unique goods but focusing on the intrinsic similarities with those of other producers. As such, suppliers seek to convince customers of the superior value of their products, just as that of other market leaders. The aim is to try to take a share of the market dominated by one or a few large producers. Product invention refers to the tendency to provide new goods to fill an existing gap in the market to satisfy consumers’ demands. Finally, product adaptation refers to the modification of existing goods with aim of suiting them to the market’s characteristics. Different strategies are used for different market segments (Cant, Wiid, & Kallier, 2015). Nissans decision to develop six new models was an adaptation strategy designed to produce cars that could be sold in emerging markets, considering the markets’ budgetary constraints. The cars had to be built without many of the ordinary features found in most cars, including power windows and air bags.
The decision to sell the existing models at half price is known as price elasticity of demand. It denotes the intricate relationship between changes in demand due to changes in price levels. The price levels may be determined by customers’ maximum bid for the goods or the unique attributes of various groups of customers. Price elasticity of demand is a form of price discrimination because suppliers offer goods as different prices to different market segments depending on each subset’s characteristics with the aim of increasing sales and reducing consumer surplus (Hollensen, 2015).
The major reason why Nissan may choose to use price discrimination model is because the company wants to venture in a new market that comprises of low and middle income earners. The company may opt of to sell the cars depending on the amount customers are willing to pay so that it can attract more sales. Further, it may decide to do so to meet the demand and reduce incurring more costs on additional production facilities and processes.
To some extent, selling the cars at half price may only be beneficial to the customers but have a negative impact to the company. The existing Nissan models, such as sedans, have high quality features which translate to higher production costs and by selling them at lower costs the company may incur losses. Further, the strategy may force the firm to reduce the price of its cars in other markets if customers demand so.
Cant, M. C., Wiid, J. A., & Kallier, S. M. (2015). Product strategy: Factors that influence product strategy decisions of SMEs in South Africa. Journal of Applied Business Research, 31(2), 621.
Hollensen, S. (2015). Marketing management: A relationship approach. Pearson Education.
Siddharth, P., Mukai, A., & Hagiwara, Y. (2012). Nissan revives Datsun after three decades to boost sales. NewsmaxFinance. Retrieved from http://www.newsmax.com/Finance/Companies/Nissan-Datsun-Salescars/2012/03/20/id/433161/
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