Chevrolet
Introduction
Chevrolet is an automobile manufacturer that has transitioned from an American icon into a worldwide brand by demonstrating quality and durability in their various successful models. Chevrolet ironically exists because of its number one competitor, Ford Motor Company. William Durant wanted to compete against Ford’s affordable Model T so he founded Chevrolet in 1911. They decided to name the brand after top racer, Louis Chevrolet, who was hired to design the first Chevy. After a discrepancy between the two, Chevrolet left the company, but the name stayed. 16 years after being founded, Chevrolet was surpassing Ford in number of vehicles sold. Despite Chevrolet’s failures over its 110 year history they have managed to dominate and stay relevant in the automobile industry for over a century.
Situation Analysis
A strengths, weaknesses, opportunities, and threats (SWOT) analysis is an analysis on both the internal and external environment of an organization. This kind of analysis is a simple framework that organizes information from the situation analysis in a way that is easily understood. A SWOT analysis structures an evaluation of the fit between what a firm can and cannot do and the environmental conditions working for and against the firm. It is helpful in not only understanding the current situation of the firm but also what it can do about it.
I. Strengths
Chevrolet has been around for over a century and like other established brands, it has many strengths. To start off, the company has a long history and has established itself as a brand known worldwide for quality, durability, low costs, and innovation. Chevrolet is one of the most popular car brands in the world. It has a level of brand awareness and loyalty among consumers that other competitors do not. Next, Chevrolet is associated with every vehicle category on the road. The company has a product portfolio that includes: delivery vans, large trucks; full-size, mid-size, compact, and sub-compact automobiles; sports cars, and even race cars. And if this wasn't enough, many of their models, like the Camaro, Corvette, and Suburban, are extremely popular and have some of the longest product life cycles of any vehicle on the road. The strengths don’t stop there as Chevrolet is owned by General Motors which is a world renowned brand. The association allows Chevrolet to reap the benefits of the resources, such as newly acquired brands, and reputation of its parent company. Lastly, Chevrolet’s newly appointed leadership has demonstrated that it now has the strength of strong leadership. The new Ceo, Mary Barra has been admired for how she handled Chevrolet having to issue a mass recall of 2.6 million Chevy Cobalts. She handled the situation with honesty and compassion which helped mitigate the negative consequences.
II. Weaknesses
Also as a result of its long history, the company has some weaknesses that affect its reputation and products. First, the company has had many issues with serious recalls on some of its vehicles. The company had to initially issue a recall on 2.6 million Chevy Cobalts due to a problem with the ignition switch but expanded it later to include other models that had the same issue. If that wasn't bad enough, an internal investigation later discovered that employees knew about the issue ten years prior to the recall being issued but were dissuaded to bring it up. The recall situation severely damaged the company’s reputation and caused consumers to lose trust in the company as a whole. The next weakness affecting Chevrolet is consumers concerns regarding the safety of Chevrolet vehicles. This had been an issue with previous models such as the Corvair but recent issues with Cheverolet’s electric vehicle, the Volt, have brought them to light again. When tested, the Volt’s electric batteries were proven to catch fire after being involved in a crash. This caused consumers’ doubt and perceived risk of owning an electric vehicle to increase which hurt the reputation of the Volt and Chevy as a whole. While the association between Chevrolet and General Motors can be see as a strength, it also can be seen as a weakness due to brand contamination. This is demonstrated by the negative effect the association had on Chevrolet when the parent company filed bankruptcy in 2008 and accepted a $50 million government bailout. It caused Chevrolet to be seen as negligent and dependent on taxpayers to bail them out of their mistakes. This also gave competitors like Ford who didn't accept such a deal to capitalize and use it to paint Chevrolet as inferior. The last weakness of Chevrolet is their struggle with international marketing. The company has heavily associated itself with American heritage which has caused them to struggle with customizing their products and advertisements to fit the international market. This association has caused confusion among international consumers and backlash from American consumers as the company tries to create a brand image that appeals to both markets.
III. Opportunities
There are many opportunities that Chevrolet can take advantage of as well. The first and biggest opportunity Chevrolet can take advantage of is the market in China. China is the largest market in the world for automobiles so it represents a great opportunity for the company to grow the brand further especially in the electric vehicle market. The next opportunity is the increase in EPA regulations in the United States. General Motors dropped a significant amount of brands during their financial hard times which allows them to now focus on modifying their current brands such as Chevrolet to the EPA regulations. Chevrolet has also already developed leading edge fuel efficient technology so they can use that to take advantage of this opportunity to get ahead. Lastly, Chevrolet can take advantage of changing consumer needs such as an increase in demand for vehicles with better fuel efficiency and bigger vehicles. They can do so by utilizing their broad vehicle portfolio and innovative fuel efficiency technology.
IV. Threats
Chevrolet is a part of the very competitive automotive industry so the threats the company faces are abundant. The biggest threat to the company are competing automobile brands such as Ford, Nissan, Dodge, Tesla, and Toyota. These companies all compete with Chevrolet but Ford represents the most direct competitor as Ford it shares a similar history. The two companies both have a long history in American heritage but Ford is viewed by many as creating the first American car. The next biggest threat is the increasing EPA regulations because while they could represent an opportunity for Chevy to pull ahead, they also represent a threat if they don’t. If Chevrolet fails to innovate to meet new EPA regulations they will face a fine that could set the company back financially. Similar to how increasing EPA regulations can either be a threat or opportunity, so can the market in China. While the market can be a big opportunity for electric vehicles, the Chinese government poses a threat to accessing this market. The chinese government requires that companies enter joint ventures with Chinese companies to produce electric vehicles which would require that they share trade secrets. Instead the company has chosen to import electric vehicles such as the Chevy Volt, surrendering some benefits. Lastly, Chevrolet faces the threat posed by increased competition among automobile brands. Brands are competing to beat each other in every aspect they can including fuel efficiency and safety features. Chevrolet faces a constant threat of failure if it does not innovate.
Assumptions and Missing Information
Although the case includes a lot of useful information, there are a few things not mentioned that a decision maker might want to know to make the best decision on what to do.
Statement of the problem
The Problem: Although Chevrolet has marketed itself to be embedded in american culture. It has seamlessly transitioned into new markets making Chevrolet worldwide. In order for Chevrolet to continue being a trusted car brand it needs to continue its practice of innovation so that customer value is increased. They should also aim to positively reinforce and build on their brands reputation. “According to former GM CEO Dan Akerson, the company failed because we failed to innovate.”
Symptoms of the problem: New regulations require automakers to create vehicles that are more fuel efficient. It is said that by 2025 vehicles must be able to reach 54.5 mph. Since consumers are leaning towards cars that are fuel efficient it is better for Chevrolet to start innovating since it will be costly. It is essential that Chevrolet begins to modify their cars because they need to ensure that the regulations implemented by the government are made as well as what the consumers prefer. It is their duty to create innovative cars that are environmentally safe. They also need to make sure their quality improves because it needs to be safe for the drivers.
Chevrolets reputation was ruined after its bankruptcy in 2008. In order to survive after nearly a century in business the company needed a $50 billion government bailout. A lot of consumers resentied the company for this because they felt that the company depended on taxpayers to bail them out for their mistakes. Chevrolet overextended themselves and their consumers were aggravated since Ford had the chance for a government bailout and refused to do it. Consumers respect a manufacturer that stands on its own which is why Chevrolet received major backlash and their reputation was tarnished. Even though over 2.6 recalls were issued in 2014 and malfunctions of the cars were being reported the company began to lose the trust of its consumers after the government bailout.
Development and Evaluation of Alternatives
In order for Chevrolet to continue being a trusted car brand it needs to continue its practice of innovation to appeal towards different types of consumers. In order to do so we must develop a set of strategic alternatives that have a reasonable potential to solve the problem. Chevrolet already has an impressive lineup of vehicles but should focus on their technology designs in order to expand their future consumer market. The first alternative would be to assemble an innovation team that tests new eco friendly technologies and features that could be incorporated into Chevrolet’s future vehicle fleets. The next alternative would be to use direct marketing with a sales force to market towards specific customer markets. The last alternative would be to start an incentive program where consumers are encouraged to trade in their current car for a new environmentally friendly, electric vehicle.
Alternative 1 addresses the problem very well because it continues its practice of constant innovation so customer value is increased, and this is done through the development of new eco- friendly technology in Chevrolet vehicles. The demand for more fuel efficient vehicles will drive the production of electric vehicles (EVs) to fulfil the wants and needs of consumers. The second alternative would also address the problem Chevrolet has, because it would use a direct sales force to directly market their new eco- friendly, electric vehicles that are being developed and produced to potential markets that would have interested consumers. The final alternative would also address the problem Chevrolet possesses, because it would encourage car owners to trade in their less eco-friendly, older vehicle for a brand new electric vehicle. This alternative would be a win-win scenario for both Chevrolet and the environment. Chevrolet would gain business and also be saving the environment at the same time.
All three of these alternatives have the ability and potential to assist in achieving the plan’s stated goals and objectives. Chevrolet’s mission statement reads, “To provide the highest level of service in all aspects of automotive dealership operations, providing our customers with the highest quality products and services at a fair and competitive price. We are committed to leading and dominating the industry in automotive excellence in our market.” The three alternatives we provided go hand in hand with their mission statement, because Chevrolet wants to provide the highest quality vehicles for their customers all while dominating the automotive industry.
The three alternatives given coincide very well with the SWOT Analysis we conducted in Step 1 because Chevrolet has been around for many years and has earned the loyalty and business from millions of customers worldwide. They have established themselves as a well known brand through their quality, durability, low costs, and innovation. These new electric vehicle fleets would fit well in Chevrolet’s already extensive product portfolio. Issues that have occurred to Chevrolet in the past will be avoided with these EVs since internal innovation teams will test new technologies and features prior to being released openly into the market. Some opportunities Chevrolet should take advantage of is the market in China. As previously stated China is the largest market in the world for automobiles so it represents a great opportunity for the company to grow the brand further especially in the electric vehicle market. Lastly, Chevrolet faces the threat of increased competition among automobile brands. Brands try to outdo each other more and more by improving technology, better fuel efficiency, and electric capabilities.
Alternative 1:
2020 Unfavorable Neutral Favorable
Environment Environment Environment
Sales
Dollars $3,000,000 $5,000,000 $8,000,000
Units (per unit) 500,000 850,000 1,500,000
Costs
Product Development $600,000 $800,000 $1,600,000
Production Costs $1,500,000 $2,400,000 $4,000,000
Advertising $500,000 $500,000 $500,000
Sales Commission(10%) $350,000 $450,000 $750,000
Other selling expenses $10,000 $140,000 $240,000
Earnings before taxes $240,000 $760,000 $910,000
Recommendations
Based on the situation analysis and development & evaluation of alternatives, we recommend Chevrolet focus more on their designs geared towards the eco-friendly technologies on their popular models and other automobile line-up by focusing more company resources into them. Chevrolet, has attempted to create eco-friendly cars in the past, and can continue to innovate focusing on their more popular models with more eco-friendly options. The next recommendation would be for Chevrolet to offer customers more incentives (rebates, Cash back, Discounts, etc.) to purchase their eco-friendly or electric vehicles
Last, recommendation is to market new innovative cars into other emerging car markets such as China, where they are focusing on environmentally friendly technologies.
Implementation
Critical players in the plan to release a new electric fleet of cars are the Chevrolet marketing team, investors, loyal customers, and people that want to save the environment. Everyone listed above is likely to be naturally in favor of the alternative selected because they all support innovation and technology advances. Electric vehicles are the future and in order to get people on board proper demonstrations of this innovative technology must be shared with the public. The first step that must be done is assemble an innovation team that tests new technology that will be used in future vehicles. Constant innovation in technology is key especially in this day in age because you will attract a bigger market and stay ahead of competitor brands. Constant testing will assure the highest quality vehicles as promised in Chevrolet’s mission statement. Next step in this plan would be to slowly introduce this electric technology as it begins to come out to the public in order to attract customers and create buzz around their new fleet of vehicles. Throughout the whole plan a sales force will be used to directly market their new electric vehicles. This will ensure product awareness and keep customers updated with any new advancements and news regarding these new vehicles and technology. About five to six months in when vehicles begin to be released and sold to the public is when commencement of the Chevrolet trade in program will begin. This trade in program will make consumers happy because Chevrolet will be taking initiative to save the environment by providing high quality electric vehicles while recycling trade in vehicles. Finally sticking to the status quo throughout the whole process will be crucial because it will give loyal customers that sense of familiarity to the brand. With some tactical modifications this will result in the best decision of action in Chevrolet’s current situation.
Timeline:
Evaluate the diversity of vehicle types and sizes that are sold under the Chevrolet brand name. What strengths and weaknesses are evident in chevys product mix?
How has Chevrolet strategically managed its brand and reputation over the last 100 years? What opportunities and threats will affect Chevys branding and reputation in the future?
What specific marketing strategies would you recommend that might help Chevrolet last another 100 years? How important is Chevys legacy of innovation to the brand's future?
SLMX10
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