Case Study – Suzuki Samuri

Section C – Group 11

Suzuki Samuri Case Analysis Section - C Group – 11
Name Aman Srivastava Deepak Sudhakar Krishna Bajaj Prasanna Patange Richa Singh Saikiran Pollamarasetty Vivek Gupta Roll Number PGP2011532 PGP2011617 PGP2011696 PGP2011770 PGP2011823 PGP2011843 PGP2011944

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Case Study – Suzuki Samuri Introduction

Section C – Group 11

Suzuki Samurai was founded in 1909 and began its business by manufacturing and marketing 2-wheel 36 cubic cc motorcycles which turned out be a huge success. As their business grew they launched a variety of products such as motorcycles, automobiles, motorized wheelchairs, engines, water pumps, prefabricated houses, but producing and marketing lightweight vehicles still remained their main focus. Over the years their business expanded across 100 countries because of the economical cost of the automobiles. In 1983, General motors purchased 5% of Suzuki, and launched the Chevrolet Sprint, a subcompact car for US market which turned out to be a great success. Thus, Suzuki decided to set its new subsidiary American Suzuki Motor Corporation (ASMC) in US and appointed Doughlas Mazza as its head to create the marketing plan for their new launch, SJ413. Mazza’s goal was to establish ASMC as major car company in US and his main challenge was positioning Suzuki Samurai in US. Based on Samurai’s physical characteristics there were three options available: positioning it as a compact sport utility vehicle, as a compact pickup truck or as a subcompact car. Product After establishing itself as a major brand in the US motorcycle industry, Suzuki has decided to enter the automobile sector by launching a mini-four-wheel drive-off vehicle called Suzuki Samurai for the US market. Suzuki Samurai has two versions for this model: a convertible and a hard top. The physical characteristics were such that Samurai could be positioned either as a compact sports utility vehicle, as a compact pickup truck or as a subcompact car. During the marketing research a number of customers stated that the vehicle was versatile, had good mileage, was durable, looked cute and unique and also handled well in the rain, snow or off-road. Moreover, owing to the brand name of Suzuki and Japanese manufacturers, they expected the vehicle to have higher quality and better engineering than the domestic competition. Price ASMC planned to sell Suzuki Samurai at a retail price of $5995 in the US market. This price was significantly less than the vehicles presently in the market (launched by the domestic competitors), which were priced at around $10,000 to $13,000 range. When prospective customers were told about the tentative price of Suzuki Samurai they were either surprised or happy or were suspicious and doubted the vehicle’s quality. They expected the price to be between the range of $8000 and $12000. Furthermore, Samurai was priced substantially higher in Canada than the proposed price in the US. Looking at the reactions of customers and the success of the vehicle in the other countries, it would be more beneficial to price the product higher than the current price, for example around $9000. Place Suzuki Samurai is going to be launched in the US market for the first time. In 1984, Japanese imports achieved 17.7% share in the US new-car and truck sales and it is expected to rise to 19.2% in the next year. Moreover, US automobile industry was expected to grow by 10% in 1985. This opportunity was too good to resist for ASMC who were actually planning to enter the US market independently in 1989. Presently, because of the new start in the automobile industry, Suzuki planned to have dealerships only in two or three select states like California, Florida and Georgia. Promotion

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Case Study – Suzuki Samuri

Section C – Group 11

Suzuki Samurai is a highly versatile 4-wheeler and hence it was possible to position it either as a sports utility vehicle, as a compact pick-up or as a subcompact car. The promotion of the vehicle would depend on how the vehicle would be positioned. Presently, ASMC planned to have 47 dealers for the distribution of the vehicle. Segmentation and Targeting The conventional way of segmenting the market for automobiles has been to divide the market according to age, gender, income and status. However, if Suzuki has to create an impact, it cannot afford to leave out any particular category of customers based on conventional segmentation. The interest in Samurai’s predecessor, the SJ410, as observed from the feedback form, the Florida dealerships, is more or less uniform across all conventional segments. Being a new entrant in the market, Suzuki has to catch the attention of as many customers as possible. One way of doing this is to segment the market according to whether the customer has a car or not. If he has a car, further segmentation can be done according to how long he has been using his car. Accordingly, Suzuki can target those customers who have used their car for more than 4 years and are looking for a refreshing change. With appropriate positioning and aggressive promotion, Suzuki can create a strong impact and portray the Samurai as the perfect alternative to the vehicles offered by the market leaders. With regard to the segment of the market that does not own a car, Suzuki can specifically target those customers who are in the process of buying their first car. This sub-segment would primarily include young college students looking out to buy something totally different. The Samurai would be a perfect product to market to such a segment, considering that it is a convertible model with strikingly good looks and utility value. Generally college students have a limited budget and tend to go in for used vehicles over new ones. However, it helps that the price of the Samurai is very competitive and hence, price should not be a major hurdle. More importantly, it is the positioning of the Samurai that will play the major role in determining whether it can strike a chord with its target customers. Suzuki has the following positioning options. Positioning Options

1) As an SUV
Pros: A compact sports utility vehicle is one of the four options for positioning the Samurai. The Samurai looks like a “mini-jeep”, has 4 wheel drive capacity and has the ability to drive well off-road. All these qualities make the Suzuki Samurai an ideal SUV. Also, foreign owners are appreciative of Samurai’s reliability, manoeuvrability and ease of repair. Thus, positioning it as an SUV in the US will be consistent with Samurai’s heritage. Samurai’s main distinguishing factors from other SUVs are its size and price. Samurai is smaller and lighter than any other SUV in the US and is proposed to price at $5,995 which is much cheaper than other SUVs (which are priced upwards of $10,000). ASMC can position the Samurai as a ‘Tough little cheap jeep’, highlighting the compact yet sturdy structure as well as the price advantage that the vehicle offers. Cons: However, the main disadvantage of positioning is the relatively smaller scope for generating sales volume since the market for SUVs is less than 3% of the total automobile industry. This is not in keeping with the sales volumes envisioned by ASMC because in order to build annual sales of 30,000 units in 2 PGP 2011-13 Page 3

Case Study – Suzuki Samuri

Section C – Group 11

years, the Samurai will have to exceed the 1984 combined sales of all imported compact SUVs, which is easier said than done.

2) As a Subcompact Car
Pros: Subcompact cars have the largest market in US automobile industry with sales of 1,752,248 units for the year 1984. Price is one of the factors that buyers consider while purchasing. Suzuki’s strategy of launching Samurai for low price and the versatility it is offering will attract attention of buyers who are shopping for economy car. Samurai which is launched as SJ413 in Europe created a trend. Professionals especially doctors and lawyers drove SJ413s to their offices. Gas mileage is considered as one of the primary factor for everyday driving. Samurai’s mileage of 28 miles per gallon in city and highway driving is one of the advantages for Suzuki to position Samurai as Subcompact car. Samurai’s looks can be emphasized during promotion as styling is one of the considerations by buyer while purchasing. Cons: Samurai was built on a truck platform and positioning it as Subcompact car might not match with the consumers’ expectations. Passenger comfort is one of the factors considered as purchasing decision by buyers. Ride on Samurai is stiffer and less comfortable than even the least-expensive subcompact.

3) As a compact pickup truck
Pros: This market positioning addresses the shortcoming of the SUV positioning by offering a market which is two and a half times the size of the market for compact sport utility vehicles. The Japanese trucks have high level of consumer acceptance in US market accounting for 54% of total 19084 compact pickup truck sales. The Suzuki Motor Corporation currently faces the restriction of exports due to voluntary restraint agreement (VRA) according to which only 17000 cars can be exported to US. But there is no such restraint on the export of trucks to US. If Samurai is purchased without a back seat it is considered as a truck and thus, such positioning looks feasible. The price of $5995 won’t create a problem for its new consumers as the price is at parity with the other Japanese trucks which are highly accepted in the US automobile market. Cons: Though the trucks are not subjected to Japanese VRA quotas but the tariffs on their exports from Japan to US enforce a tariff of 25% as compared to the 2.5% imposed on cars. To achieve selling target of 10,500 vehicles positioned as trucks would thus reduce the margins of the product thus hitting the profitability of the company in the long run. Since the US market already has a fairly good presence of Japanese trucks, the ASMC’s Samurai may not be able to differentiate itself from the rest and may be lost in the crowd. Thus its target of becoming a market leader and to build a strong foundation for its new car launches after 1989 by creating a strong brand shall be hurt. The advertising campaign would have to be very serious, practical, male targeted and designed to portray Samurai as a tough truck. Thus no unique selling proposition is portrayed through the advertising which will not create a strong brand image for Suzuki. Positioning Strategy Proposed Typically, every launch of a new product in a market would require positioning of the new product in a way so as to appeal to the target market, identified after segmenting the customer base. This reasoning seems to be sound, however, this approach greatly reduces the size of the target customer, and hence, it may restrict revenue. In order to avoid such a situation, we may use a strategy, wherein the product is introduced not to target any particular segment, but to appeal to the larger customer base. OverPGP 2011-13 Page 4

Case Study – Suzuki Samuri

Section C – Group 11

defining a product may eliminate any opportunity of need-based product identification and association by the customer. Suzuki is in a similar situation where it is contemplating a marketing strategy for its SJ410 and SJ413 product. Suzuki may avoid positioning itself in any of specific type of vehicles to not exclude large groups of potential buyers. This strategy of “unpositioning”, would allow a larger consumer base to identify with the company, interpreting the offerings according to their own needs. This method may allow Suzuki to cover all the three possible segments namely, compact sports utility vehicle, compact pickup truck and subcompact car. Advantages of the Strategy The un-positioned Suzuki Samurai will appeal to a larger pool of consumers and ensure acceptance. In the highly competitive sector of automobiles, the company may be able to carve out a special place for itself in the market and establish its dominance. If each customer defines the car according to his own desire, it would lead to better congruence between the vehicle’s promise and value delivered, ensuring better consumer satisfaction. This strategy may also help to beak the dominance of the already established players in the sector as Suzuki would be playing on its own plane where none other companies have significant presence. This strategy would augment sales and help the company in its long term strategy of establishing itself as a major player in the market. With the purpose of versatile transportation being addressed by the product offering, the company may prove to be a major threat to the existing players by taking up their share of the market. Disadvantage of the Strategy The strategy is very delicately poised as the vehicles offered may face rejection by the consumers in case they are not able to associate with the product or are confused about its utility/positioning. The thought of “alternative to small-car boredom” would lead to considerable confusion and a difficulty in choosing which features to emphasise on while trying to gauge the need of a potential customer. In addition, by adopting this strategy, the company would have to forego the opportunity cost of establishing as a market leader in the niche segment of the “Tough-Little-Cheap-Jeep”. This trade off and the possibility of confusion amongst the consumers would need to be strongly addressed before taking up this strategy. In the long run, the company may be advised to highlight on a specific need of consumer so as to increase the sales of the vehicles.

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