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1 International Marketing Final Project ( Tesla / Karsan Joint Venture in Turkey) 1. Executive Summary Founded in 2003, Elon Musk alongside Martin Eberhart and Marc Tarpenning are three Silicon Valley engineers who founded Tesla Motors Inc. to prove that electric vehicles will soon be on the rise over gasoline-powered cars. Over the years, the electric vehicle industry growth has been increasing due to fuel prices remaining high in several foreign countries. As a result, the demand for more energy efficient cars has been on the rise due to the concern for the environment. Tesla Motors Inc., is about “being in the right place at the right time,” which is why they have been more successful than other electric car companies, “including Fisker, and other clean tech companies in general, [whom] have failed.” While it’s all about timing, Tesla Motors Inc., believe that Turkey will be the next emerging market for their consumers. As the Turkish Lira is losing value, this makes Turkey have the world’s most expensive oil and gas while electric prices are low. The Tesla Motor Company has created a lineup of vehicles which consists of Model S, Model X, and the Roadster. While each vehicle is made up of different components targeted to a specific consumer, Elon Musk was able to manage each vehicle under the same specifications, including zero emission cars with the ability to go nearly three hundred miles per charge. These vehicles have withheld the expectations of a luxury car featuring things such as a high tech panorama roofing and a touch screen dashboard. 2. Product / Service Instead of introducing an existing vehicle that has already been produced from the trio lineup, Tesla Motors would like to collaborate with Karsan, whom have been operating in the Turkish automative industry producing “light” commercial vehicles in a joint-venture. While Karsan is owned 100% by Turkish capital, together we will work to produce and manufacture a newly innovated electric vehicle using the base model S as a guide that will meet the needs of the Turkish consumers under two companies. Through this joint-venture, Karsan will provide the information and supply the resources for production throughout Turkey and give us insight on the current market in the constructive process while Tesla will aid in the creative design process, research and development, and innovation. We have chosen to do a joint-venture with Karsan of Turkey for a number of reasons. The Mission statement of Karsan is, “Identification of transportation needs, formulation of the necessary systems, products and services to design, produce and present”. The needs for transportation in Turkey is for electric cars. We will utilize Karsan for design, production, and presentation. Karsan has 4 main fields of operations, which fit into our needs as a joint venture. These fields are,"Original Equipment Manufacturing (OEM)", providing development, manufacturing, marketing, sales and after-sales services for Karsan brand vehicles in domestic markets and abroad, "Integrated Strategic Partnerships", providing manufacturing, marketing, sales and after- sales services for brands that have targeted growth in the region, “Contract Manufacturing", meaning design and engineering support as well as vehicle manufacturing for powerful global brands "Other Operations", covering various services that the company provides for both local and foreign 2 manufacturers”. Because the joint-venture is based on meeting the needs and desires of the people in Turkey, Karsan has “aimed to offer modern product and service solutions” since it was founded in 1966. ❖ Product: High technology electric car with the supply resources from our partner Karsan Company 3. Country’s Information for Decision Purposes ➢ Countries selected: Turkey (Middle East) and South Korea (Asia) Geographic and Demographic: Turkey South Korea Industry Textiles, food processing, autos, mining, steel, petroleum automobile production, chemicals, shipbuilding, steel, textiles Imports (Turkey does have much interaction business with US than South Korea does) specially absolute zero in vehicles import. America's exports to Turkey amounted to $11.1 billion or 5.6% of its overall imports. - Aircraft, spacecraft: $1.7 billion - Machinery: $1.2 billion - Iron and steel: $1 billion - Medical, technical equipment: $729.5 million - Oil: $689.1 million - Pharmaceuticals: $556.9 million Cotton: $532.3 million - Electronic equipment: $478.3 million - Plastics: $432.8 million - Organic chemicals: $415.4 million US exports to South Korea amounted to $44.2 billion or 10.1% of its overall imports. - Machinery: $7.8 billion - Electronic equipment: $6.7 billion - Medical, technical equipment: $3.5 billion - Aircraft, spacecraft: $2.4 billion - Vehicles: $1.7 billion - Oil: $1.7 billion - Other chemical goods: $1.5 billion - Plastics: $1.5 billion - Organic chemicals: $1.3 billion - Cereals: $1.3 billion Exports (Same like Import Factors) Apparel, foodstuffs, textiles, metal manufactures, transport equipment Electronic products, machinery and equipment, motor vehicles, steel, ships, textiles 3 Political Opportunities (The government on both Turkey and South Korea show interests on developing the electric car) • The Turkish government wants to promote green cars in the country. • The Turkish government has been working towards producing its own 'national vehicle', designed to showcase the region’s production and development facilities.The local and central Turkish governments and administrations show essential interest to the automotive industry and offer extensive incentives for the domestic manufacturers when the first Electric Vehicle was marketed by Renault in 2012. • Initially the South Korean government had the ambitious goal to become the fourth largest market for e-mobility in 2015. • The Korean economic system and Electric Vehicle Industry are dominated by large government-sponsored industrial conglomerates known as ’chaebols‘ which were formed after the Korean War. • The government said it will invest 562.1 billion won (US$490 million) this year to promote the application of nano-technology on not only automobiles, but also in the development of semiconductors and new materials. GDP per Capita (2014-2015) And The GDP annual growth rate of Turkey will have significant raise in 2016. U.S. $20,438 (1.00 USD= 2.83287 TRY) U.S. $33,629 (1.00 USD= 1,154.86 KRW) Consumer Behaviors (Both Turkey and South Korean has a good consumer purchasing power on quality product which is a huge opportunity for announcing new technology products such as high quality car by our Tesla Company) - Consumers are aware of quality (certificates of guarantee). - When deciding to buy, the Turkish consumer finds out about conditions of payment. - Young people are aware of advertising and like products close to those which suit western tastes. However, concerning foodstuffs, traditional Turkish products are unanimously approved. - Korean consumers are very sensitive to the power of the brand name, the healthy aspect of a product and perfect after sales services. - They are ready to pay for the quality. Korean consumers like to be guided and well informed when they buy something. - They are less and less nationalist in their purchasing preference. Consumer Segmentations and Trends Middle aged in Turkey probably is our target because: - The largest population in Turkey. - Middle Youth consumers value their car brands. - All consumer segmentations in South Korea does not look like they have much interest on cars or electric technologies. - Generations like beauty products or spend much money on education, entertainments, fashion, travels, or family life. Climate Temperate; hot, dry summers with mild, wet winters; harsher in interior Temperate, with rainfall heavier in summer than winter; cold winters Terrain High central plateau (Anatolia); narrow coastal plain; several mountain ranges Mostly hills and mountains; wide coastal plains in west and south 4 Market Comparisons and Reasons why our company chose Turkey ❖ Car Market from the past few years: Turkey Top 5 largest Automotive Companies: Oyak Renult, Ford Otosan, Tofas, Hyundai Assan, and Toyota • There are 4 popular types of vehicle in Turkey: Passenger car (Oyak Renault and Hyundai), Light Commercial Vehicle (Ford Otosan and Tofas), Heavy Commercial Vehicle (M.Benz Turk and Ford Otosan), and Tractor (Turk Traktor) • The highest domestic market sales (demand): Passenger Car and Light Commercial Vehicle that our main product is Tesla which will be a good choice for expanding the market to Turkey. • The electric vehicle is still not broadly available in Turkey and still underdevelopment which is a good opportunity for us to come in and create a new product. --> Finally, we decided to choose Turkey as our target market to expand and export our electric car technology. South Korea Top 5 largest Automotive Companies: Hyundai Motor, Kia Motors, General Motors Korea, Ssangyong Motor, and Renault-Samsung Motors. • There are many types of electric vehicle in South Korea has been sold already. Below is the chart of EVs was sold in 2015 Model Jun 2015 2015 Market Share BMW i3 39 12% Chevy Spark EV 4 5% Kia Ray EV 0 4% Kia Soul EV 221 52% Samsung SM3 ZE 101 27% Total 365 100% • --> So if our Tesla Company enters this market, there will be many risks because of potential competitors in South Korea, so we will have many disadvantages on developing the product and gaining more market share. These barriers can lead us into a dangerous situation and the loss will be absolutely presented. 5 In addition, the people of South Korea do not live in a brick and mortar