CHAPTER-1

INTRODUCTION
1.1 Market analysis

Market Analysis is a key part of any startup strategy.

If one cannot demonstrate that adequate demand for a product or service exists, then the
project is not feasible. In such a case, there will be no need to continue with the rest of the
business plan.

Market analysis is therefore a major component of any business plan. It

provides market research answers to questions such as:

 What is the current or projected demand for the proposed products or

services?;
 What are the target markets for this product or service?;
 What competition exists in this market?;
 What is population and household characteristics, including trends and
projections in the targeted area;
 What are the income characteristics of the project area? etc.
In short, market analysis helps to identify problems/opportunities in a market;how the
competition is solving or exploiting those problems and how you plan to solve the problem
better or differently.

The challenge for any business is to gain a sufficiently detailed understanding of the
fundamentals of a market. Without this insight, it is unlikely that marketing strategies will
prove effective or that marketing objectives will be met.

Gaining this understanding is the task of market analysis.

By market fundamentals we mean understanding issues such as:

 How big is the market? (for example, measured by sales value, volume sold etc.)

 How fast is the market growing and what is the market growth potential?

 The key social, economic, political/legal and technological factors that drive change
in the market

 Who are the existing competitors and what market shares do they have?

 The extent of branding and customer loyalty in the market

 How the market is segmented to meet different customer needs

  Customer preferences in terms of when and where they buy, what prices they pay
and which methods of promotion are effective

 The potential for developing a competitive position in a market – either through a

USP or through effective price competition

The process of analysing the market should not be considered as a one-off. An effective
marketing team is constantly searching and updating their market knowledge.

However, detailed marketing analysis is particularly important for tasks such as:

 Forecasting sales for new products or investments into new markets

 Gathering evidence to support a finance-raising exercise

 To support a new marketing strategy or significant changes to the marketing

objectives

 To help make decisions in relation to significant organisational or operational

change

There are several methods of analysing a market that are in common use. The following
methods are covered in the following sections:

 Test marketing

 Trend analysis (extrapolation, moving averages and correlation)

1.2 BENEFITS OF MARKET ANALYSIS

1. Market research guides your communicaton with current and potential customer

Once you have your research results, you should have enough ammunition to formulate the
most effective way to communicate to your customers. You should know what they
like/don’t like to hear/see/do. Then you can tailor what you say to them to make them take
action.

2. Market resercch helps you identify opportunity in th market place

Research might make it obvious that a new product you have planned may not be what
your market wants or needs. You may then decide to make modifications on what you are
going to offer to suit your audience.
3. Market research helps you minimize risk

Through market research, you may find all the information you need to decide whether to
take action on a particular subject. For example, you may find that the particular location
where you wanted to open a shop already has a saturated market in your line of business,
which should make you refrain from making that decision and look for a more appropriate
spot.

4. market research measures the reputation

It’s always good to know how you measure against your competitors. Market research finds
out just where you are and then, according to the results, you can take action to change
perception.

5. market research identifies potential problemss

You can get consumers’ reactions to a new product or service when it is still being
developed. This should enlighten any further development so it suits its intended market.

6. market research helps you plan ahead

Research can estimate the likely sales of a new product/service and also the advertising
expenditure required to achieve maximum profits.

7. market research helps you establish your market positioning

if you treat your market research as an ongoing exercise that you do periodically, you’ll find
that you’ll have a lot of data to be able to analyse your customers and establish any
particular trends.

8.market research helps establish trends

It’s important to know the position of your business at particular moments in time.
Information from market research helps you benchmark and monitor your progress, which
can be useful to make decisions and take action.
9. market research can determine the most persuasive problem

Every brand needs to make a promise. If you think of the most known brands, they all make
a promise to you and you usually know what is by just looking at their logo. It can be
security, a fast and tasty meal or the assurance of top technology. It needs to be simple and
market research can help you define what your brand’s promise is.

10 . market research can find that compromise

The team involved in the launch of a new product/service all have their individual
perceptions and gut feelings. These certainly should not be ignored, but by going straight
to the target audience, you will gain thoughts and opinions from people who may be less
biased or less emotionally attached to a new development or service. It helps gain a new
angle, hopefully a compromise in just how you are going to go about a new launch, a new
brand or a brand repositioning.

The team involved in the launch of a new product/service all have their individual
perceptions and gut feelings. These certainly should not be ignored, but by going straigIn a
nutshell, market research is an invaluable tool that, at first, might seem expensive and slow,
but it’s nothing more than an investment. As one of our very good clients always says, “ Best
to measure twice and cut once to maximise your returns”.

1.2.1 OTHER BENFITS OF MARKET ANALYSIS

 Great help in understanding your customers:

Market analysis is a technique through which the comprehensive profile of an
.ideal.
customer for your business can be collected. It can help in ascertaining the size
of the.
market for your business. Also, it will also help in gaining insights on their
location.
age, income, and gender that can lead the way for making specific marketing
campaigns.

 Analyze your competitors

To analyze your competitors, market analysis is the most important
weapon. It can also help in analyzing the new competitors, if any,
who are trying to gain traction in the market. It also helps in
gauging at the reaction of competitors when you launch any new
product or service. Weaknesses of competitors’ strategy are one of
the most important things that this analysis helps to identify.
  Teat before launch
appropriate strategy to market the product.
launch and then market analysis will help you devise the most
Once your product reaches the final stage, abstain from jumping
directly into its marketing; rather test the product or service .

1.3 FACTORS AFFECTING MARKET RESERCH

There are some key factors you need to consider before you launch a market research
survey because the decisions you make before you launch that survey could drastically
affect the results. Ten of those factors are discussed below .

1. GOALS

Before you start any market research project, it’s essential that you define very specific
goals. By identifying just one or two goals for your study, the questions you ask will be
more focused. You’ll eliminate the need to ask too many questions, which can annoy
respondents and cause them to abandon your survey before they complete it. Only ask
questions that you need to know the answers to in order to reach your one or two
defined goals. AYTM helps reduce survey fatigue by limiting the number of questions
and length of questions that can be included in every survey.

2. DATA

What are you looking for? Determine the specific data you need to collect in order to
meet your goals, and then create survey questions that will prompt respondents to give you
that data. For example, if you have a long list that includes your products and all of your
competitors’ similar products, you might want to conduct a MAXIMUM DIFFERENCE
SCALLIG (MaxDiff) test to determine which products consumers prefer. Rather than
providing a long list of product names, AYTM’s advance maxdiff. test allows respondents to
rate products in bite-sized groups of four. You can see how it works in the video below.

3. BUDGET

How much money do you have to invest in a market research study? Fortunately,
quantitative market research doesn’t have to be expensive with tools like AYTM, but you do
need to consider a few more things before you move forward. Do you know what questions
to ask to collect the data you need? Do you know how to analyze and interpret the results?
If not, you might need to hire someone to help you, which will add to your budget .

4. TIMING

How quickly do you need data? Traditional offline market research studies can take weeks
or months to complete (they also tend to be quite expensive). Online surveys conducted
using a do-it-yourself survey tool like AYTM are much quicker. For example, a survey of
1,000 American adults could be fulfilled within hours.

5. AUDIENCE

When you conduct a market research survey, the audience of people you want to take the
survey should be extremely well-defined. Be specific and identify gender, age, education,
income, marital status, geographic location, and other demographic traits as well as
personality traits such as hobbies, publications they read, and so on. If you’re not asking the
right people to take your survey, then the results you get could be meaningless. In fact, the
results could point you in the wrong direction, so always define your target market very
specifically.

6. Survey Questions

Writing survey questions takes some thought. First, you need to determine what questions
you should ask in order to gather the data you need to meet your goals. Second, you need to
make sure you write those questions in a language respondents will understand. Most
often, it’s best to avoid using jargon, abbreviations, and slang unless you’re certain your
target audience is familiar with those terms.

Third, be certain the phrasing of your questions doesn’t create bias among your
respondents. For example, a leading question might ask, “Do responsible parents allow
their children to get vaccinations?” The question is phrased in a way that suggests parents
who don’t support childhood vaccinations are irresponsible. It creates a negative
connotation that is likely to deliver biased results. Instead, the question could simply say,
“Do you believe children should be required to get vaccinations?”

Finally, you should have multiple people review your survey for clarity. When you write
survey questions, they all make sense to you, but you’d be surprised how others might
interpret them!

7. Analyze and Interpret

Here’s where things get tricky. If you don’t know how to analyze and interpret market
research data, then all of the time and money invested in your survey so far will have been
for naught. It doesn’t matter how much data you collect, all of those numbers are useless if
you don’t know what they mean to your goals and your business. You have two options
here. First, you can hire a market research expert or company to help you if you don’t have
the skills on your team. Alternately, you can use a do-it-yourself market research tool like
AYTM which extrapolates all of the collected data for you and presents it in easy-to-
understand reports.

8. Get Help

You might need help writing your survey, administering your survey, analyzing the data,
and interpreting the results. You might not have the expertise in house to do all of these
things, but market research tools like AYTM actually make it possible to do it yourself. With
that said, there are times when it can help to have an expert keep you on track so you know
your investment is yielding usable results. At that point, working with a full-service market
research intelligence team is a great option.

9.DECISION AND ACTION

Research is useless if you don’t take action based on the results. The hard part can be when
the results don’t match your original hypothesis. Often, people go into a market research
study with a predetermined outcome in mind. If the results don’t affirm their original
opinions or the results uncover faults in a product or business, they’ll ignore them and
claim the data is flawed.

Trust me, I’ve been in many corporate executive meetings where this has happened, or I’ve
been asked to focus only on specific results that affirm a CEO’s desires and ignore the other
data. Bottom-line, if you’re not going to listen to what the data tells you, don’t bother
investing in market research. The key is to be prepared to learn that your original
assumptions were not correct, and then, make the changes needed to rectify problems and
seize opportunities.

10. Repeat

Market research should be an ongoing process. When you complete a survey and launch a
new product as a result, follow up with customer satisfaction research. When a survey tells
you how to position your brand against competitors’ brands, don’t assume those results
will hold true forever. Follow-up to ensure consumers’ perception of your brand and other
brands haven’t changed.
Every time you invest in market research, you learn more about your customers, your
competitors, and the market. This data is so valuable, so make sure you’re collecting it and
using it!

11. TECHOLOGIACAL DEVELOPMENT

Science and technology improves day by day. New inventions of products take place often.
None will have the guarantee that his products will always possess good demand in the
market. Some technological advancement may outmode the existing products; in turn the
whole industry may come to a standstill.

People always prefer to have the latest model. A number of new products, in the place of old
ones, are being introduced into the market often. Consumers are at liberty to choose from
the new products. Therefore, consumer-oriented marketing system is essential.

12. Changing Social Behaviour

The social pattern is changing. It is essential for any product or service to keep pace with

the change in order to survive in the market. The western style has tremendously affected

in developing countries, including India. The demand for electronic entertainment items

and consumer products have changed tremendously in the last 20 years.

1.4 Tips to Improve Marketing Research Skills:

1. Identify opportunities
A market is full of possibilities. A market researcher has to continually understand the
opportunities available in the changing market.

They have to continuously analyse the market to understand the changing customer needs
and demands.Through good analytical skilss can identify the opportunities to launch new
products and advertise the products in various locations. A market researcher studies the
trends in the market and then submits a detailed report to the management or client to
make an informed decision.

2. Understand customer needs

It is essential to understand the changing needs to the customer or the market trends
before advertising or launching a product in the market.
Through market research, entrepreneurs can identify the size of their market, target
customers, their tastes and likes, and how to reach the target customers.

The study of the market can be done through surveys or questionnaires, interviewing
sample customers, and focus groups.

The information collected through these various methods can help in developing brand
positioning and targeting the right market segment.

3. BRAND RESERCH

And research can be gathered from the participants about the brand, product, and the
company.

A market survey can help in gathering information; whether customers are aware of your
brand, make comparisons with your competitors and also understand people’s perception
of your brand.

Once you gather information through market study, you can position your brand
accordingly and even improve your marketing resources.

4. Analysing and collecting data

A market researcher collects raw data from various sources, then explains them and
presents it to the client through a visually attractive report.

Through analysis, insights are gathered about the existing product or newly launched
product.

After starting a new product, it’s imperative to collect customer feedback about the
features, design, packaging, usability and other variables of the product.

This study is essential to understand the success of the launched product and whether it
will sustain in the market.

5. Avoid assumptions
After a while, it is natural to become complacent and make assumptions. Making decisions
based on assumptions or opinions will be dangerous for the business

.A businessman or market researcher must always rely on the data collected through
various sources, study the trends and then make decisions.No decision should be based on
assumptions.

7. Good communication skills

A good verbal and written communication is critical to making useful reports of the market
study or changing trends in the market.

The participants of the research or projects have to clearly understand what is required of them,
to provide appropriate and accurate information.
1.4 MARKETING STRATEGIES
Marketing strategy is used by different companies to collaborate with their consumers.
It is also employed to aware the customers about the features, specifications and
benefits of company’s products. It is basically focused on encouraging target population
to buy those specific products and services. The marketing strategies might be totally
innovative or they can be previously tried or tested strategies.
Effective marketing strategies help to get ahead in the competition.

1.5.1 Types of marketing strategies

There are different types of marketing strategies available. Picking up a marketing strategy
includes analyzing the needs of your business, your target audience and specifications of

your products.

The two main types of marketing strategy are:

  1. Business to business (B2B) marketing

 2. Business to consumer (B2C) marketing

The most common form of marketing is business to consumer (B2C) marketing.

 other types of marketing strategies :

1. Paid advertising

This includes multiple approaches for marketing. It includes traditional approaches like

TVCs and print media advertising. Also, one of the most well-known marketing approach is

internet marketing. It includes various methods like PPC (Pay per click) and paid

advertising.

2. Cause marketing

Cause marketing links the services and products of a company to a social cause or issue. It

is also well known as cause related marketing.

3. Relationship marketing

This type of marketing is basically focused on customer building. Enhancing existing

relationships with customers and improving customer loyalty.

4. Undercover marketing

This type of marketing strategy focuses on marketing the product while customers remain

unaware of the marketing strategy. It is also known as stealth marketing.

5. Word of mouth

It totally relies on what impression you leave on people. It is traditionally the most

important type of marketing strategy. Being heard is important in business world. When

you give quality services to customers, it is likely that they’d promote you.

6. Internet marketing

It is also known as cloud marketing. It usually happens over the internet. All the marketing

items are shared on the internet and promoted on various platforms via multiple

approaches.

7. Transactional marketing

Sales is particularly the most challenging work. Even for the largest retailers, selling is

always tough especially when there are high volume targets. However with the new

marketing strategies, selling isn’t as difficult as it was. In transactional marketing the

retailers encourage customers to buy with shopping coupons, discounts and huge events. It

enhances the chances of sales and motivates the target audience to buy the promoted

products.

8. Diversity marketing

It caters diverse audience by customizing and integrating different marketing strategies. It

covers different aspects like cultural, beliefs, attitudes, views and other specific needs.
1.5 Process of market analysis

1. Define the Objective

Perhaps the most important step in the market research process is defining the goals of the
project. At the core of this is understanding the root question that needs to be informed by
market research. There is typically a key business problem (or opportunity) that needs to
be acted upon, but there is a lack of information to make that decision comfortably; the job
of a market researcher is to inform that decision with solid data. Examples of “business
problems” might be “How should we price this new widget?” or “Which features should we
prioritize?”

By understanding the business problem clearly, you’ll be able to keep your research focused
and effective. At this point in the process, well before any research has been conducted, I
like to imagine what a “perfect” final research report would look like to help answer the
business question(s). You might even go as far as to mock up a fake report, with
hypothetical data, and ask your audience: “If I produce a report that looks something like
this, will you have the information you need to make an informed choice?” If the answer is
yes, now you just need to get the real data. If the answer is no, keep working with your
client/audience until the objective is clear, and be happy about the disappointment you’ve
prevented and the time you’ve saved.

Step 2. Determine Your “Research Design”

Now that you know your research object, it is time to plan out the type of research that will
best obtain the necessary data. Think of the “research design” as your detailed plan of
attack. In this step you will first determine your market research method (will it be a
survey, focus group, etc.?). You will also think through specifics about how you will identify
and choose your sample (who are we going after? where will we find them? how will we
incentivize them?, etc.). This is also the time to plan where you will conduct your research
(telephone, in-person, mail, internet, etc.). Once again, remember to keep the end goal in
mind–what will your final report look like? Based on that, you’ll be able to identify the
types of data analysis you’ll be conducting (simple summaries, advanced regression
analysis, etc.), which dictates the structure of questions you’ll be asking.

Your choice of research instrument will be based on the nature of the data you are trying to
collect. There are three classifications to consider:

 Exploratory Research – This form of research is used when the topic is not well
defined or understood, your hypothesis is not well defined, and your knowledge of a
topic is vague. Exploratory research will help you gain broad insights, narrow your
focus, and learn the basics necessary to go deeper. Common exploratory market
research techniques include secondary research, focus groups and interviews.
Exploratory research is a qualitative form of research.

 Descriptive Research – If your research objective calls for more detailed data on a
specific topic, you’ll be conducting quantitative descriptive research. The goal of this
form of market research is to measure specific topics of interest, usually in a
quantitative way. Surveys are the most common research instrument for descriptive
research.

 Causal Research – The most specific type of research is causal research, which usually
comes in the form of a field test or experiment. In this case, you are trying to determine
a causal relationship between variables. For example, does the music I play in my
restaurant increase dessert sales (i.e. is there a causal relationship between music and
sales?).
Step 3. Design & Prepare Your “Research Instrument”
In this step of the market research process, it’s time to design your research tool. If a
survey is the most appropriate tool (as determined in step 2), you’ll begin by writing your
questions and designing your questionnaire. If a focus group is your instrument of choice,
you’ll start preparing questions and materials for the moderator. You get the idea. This is
the part of the process where you start executing your plan.

By the way, step 3.5 should be to test your survey instrument with a small group prior to
broad deployment. Take your sample data and get it into a spreadsheet; are there any
issues with the data structure? This will allow you to catch potential problems early, and
there are always problems.

Step 4. Collect Your Data

This is the meat and potatoes of your project; the time when you are administering your
survey, running your focus groups, conducting your interviews, implementing your field
test, etc. The answers, choices, and observations are all being collected and recorded,
usually in spreadsheet form. Each nugget of information is precious and will be part of the
masterful conclusions you will soon draw.

Step 5. Analyze Your Data

Step 4 (data collection) has drawn to a close and you have heaps of raw data sitting in your
lap. If it’s on scraps of paper, you’ll probably need to get it in spreadsheet form for further
analysis. If it’s already in spreadsheet form, it’s time to make sure you’ve got it structured
properly. Once that’s all done, the fun begins. Run summaries with the tools provided in
your software package (typically Excel, SPSS, Minitab, etc.), build tables and graphs,
segment your results by groups that make sense (i.e. age, gender, etc.), and look for the
major trends in your data. Start to formulate the story you will tell.

Step 6. Visualize Data and Communicate Results

You’ve spent hours pouring through your raw data, building useful summary tables, charts
and graphs. Now is the time to compile the most meaningful take-aways into a digestible
report or presentation. A great way to present the data is to start with the research
objectives and business problem that were identified in step 1. Restate those business
questions, and then present your recommendations based on the data, to address those
issues.
When it comes time to presenting your results, remember to
present insights, answers and recommendations, not just charts and tables. If you put a
chart in the report, ask yourself “what does this mean and what are the implications?”
Adding this additional critical thinking to your final report will make your research more
actionable and meaningful and will set you apart from other researchers.

While it is important to “answer the original question,” remember that market research is
one input to a business decision (usually a strong input), but not the only factor.
 EXAMPLE
CHAPTER-2
SWOT AnALYSIS
1.6 SWOT AnALYSIS

SWOT is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities,
and threats to a project. It involves specifying the objective of the project and identifying
the internal and external factors that are favourable and unfavourable to achieving that
objective. The strengths and weaknesses usually arise from within an organisation, and the
opportunities and threats from external sources.

The SWOT analysis is an important part of the project planning process:

Components of SWOT

SWOT consists of four components--Strengths, Weaknesses, Opportunities, and Threats.

These four components are organized into two categories--internal and external. That is,
look internally for Strengths and Weaknesses, and look externally for Opportunities and
Threats.
 Strengths

Once you’ve identified the subject of your analysis (e.g. should we add x product to our
lineup?), it is time to identify your strengths. Quality and reliability, for example, should
always be strengths for any organization. More specifically, Charlie Ioannou defines
strengths as “the resources and capabilities that can be used to develop a competitive
advantage” (Ioannue, SWOT Analysis - An Easy to Understand Guide, 47-49).

This brings us to perhaps the most important aspect of the Strengths assessment: it is
imperative that you analyze your strengths (and weaknesses) in relation to your
competitors. In other words, what are the unique features of your company--a well-
established company with established brand trust, lower production costs, superior
customer service, stronger web presence, etc.--that will provide a competitive advantage?
Identify those and you’ve identified your strengths.

 Weaknesses

Now identify weaknesses. The more honest you are here the better. One way to think of
weakness is the absence of strength. Therefore, the items of your business model you did
not identify as strengths above are the first place to look for weaknesses. Cash flow, brand
recognition, marketing budgets, distribution networks, age of your company, etc. are all
places to consider when assessing weaknesses. The idea here is that you’ll turn these
weaknesses into strengths. Doing so, however, requires an honest assessment of where
your company needs to improve.

Now that you’ve looked internally for Strengths and Weaknesses, it’s time to look externally
for Opportunities and Threats. Opportunities and Threats interact similarly to Strengths
and Weaknesses. That is, they draw on similar dynamics (external ones, in this case) to
assess whether those create opportunities or threats to your business.
 Opportunities

Here is where you identify the opportunities for growth, greater margins, and larger market
share. Again, assessing opportunity in relation to competition is imperative. What
opportunities are there for you to distinguish your company from your competitors? What
opportunities can you identify to offer a similar service or product at a higher quality or at a
lower price than your competition? What are the needs of your customers that your field
does not currently address?

Technology is an external factor that always presents new opportunities and, as we shall
see, new threats. What technological innovations open up new opportunities for your
business to lower costs, speed up production, market more effectively, or improve customer
service?

The key with Opportunities is that they must be acted on. Remember, if you don’t act your
competitors will.

 Threats

Lastly, in which areas is your company at risk? Is your competitor developing a product to
compete with one of yours? Is there a new or bigger company poaching your best
employees? These are all threats to your business.

The Harvard Business Reviews defines “Threats” as “possible events or forces outside of
your control that your company or unit needs to plan for or decide how to mitigate.”

What about new legislation? Does a new law or proposed law threaten your production
costs? What about new tax laws? A yes to any of these equals a threat.

Lastly, just as technological innovation may provide an opportunity; it can also issue a
threat.

Threats to the business now include lawsuits over insurance liability, legislation proposing
banning the service, and higher profit-margins at competing companies.
  Advantages of SWOT
 Straightforward and only costs time to do.

 Produces new ideas to help take advantage of an organisation's strengths and

defends against threats.

 Awareness of political and environmental threats allows an organisation to have

response plans prepared.

 Disadvantages of SWOT
 May persuade organisations to compile lists rather than think about what is
essential to achieving objectives.

 Presents lists uncritically and without clear prioritisation so, for example, weak
opportunities may appear to balance strong threats.

 Usually, a simple list and not critically presented.

 1.7 SWOT analysis of Volkswagen motocorp

a. Strengths of Volkswagen – Internal Strategic Factors

 As one of the leading companies in its industry, Volkswagen has numerous strengths that
help it to thrive in the market place. These strengths not only help it to protect the market
share in existing markets but also help in penetrating new markets. Based on Fern Fort
University extensive research – some of the strengths of Volkswagen are –:

 Strong Free Cash Flow – Volkswagen has strong free cash flows that provide
resources in the hand of the company to expand into new projects.
 Strong Brand Portfolio – Over the years Volkswagen has invested in building a strong
brand portfolio. The SWOT analysis of Volkswagen just underlines this fact. This brand
portfolio can be extremely useful if the organization wants to expand into new product
categories.
 Highly successful at Go To Market strategies for its products.
 Good Returns on Capital Expenditure – Volkswagen is relatively successful at
execution of new projects and generated good returns on capital expenditure by building
new revenue streams.
 Highly skilled workforce through successful training and learning programs.
Volkswagen is investing huge resources in training and development of its employees
resulting in a workforce that is not only highly skilled but also motivated to achieve more.
 Successful track record of developing new products – product innovation.
 Strong dealer community – It has built a culture among distributor & dealers where
the dealers not only promote company’s products but also invest in training the sales team
to explain to the customer how he/she can extract the maximum benefits out of the
products.
 Strong distribution network – Over the years Volkswagen has built a reliable
distribution network that can reach majority of its potential market.
 Topmost in gross revenue – As can be seen from the graph below, Volkswagen is the top
most contributer to gross revenue in the US against some of the top brands of the world. It
is also the top most gross revenue contributer in Germany and European nations.

b. Weakness of Volkswagen – Internal Strategic Factors

Weakness are the areas where Volkswagen can improve upon. Strategy is about making
choices and weakness are the areas where a firm can improve using SWOT analysis and
build on its competitive advantage and strategic positioning.

 Investment in Research and Development is below the fastest growing players in the
industry. Even though Volkswagen is spending above the industry average on Research and
Development, it has not been able to compete with the leading players in the industry in
terms of innovation. It has come across as a mature firm looking forward to bring out
products based on tested features in the market.
 The profitability ratio and Net Contribution % of Volkswagen are below the industry
average.
 Not highly successful at integrating firms with different work culture. As mentioned
earlier even though Volkswagen is successful at integrating small companies it has its share
of failure to merge firms that have different work culture.
 Need more investment in new technologies. Given the scale of expansion and
different geographies the company is planning to expand into, Volkswagen needs to put
more money in technology to integrate the processes across the board. Right now the
investment in technologies is not at par with the vision of the company.
 High attrition rate in work force – compare to other organizations in the industry
Volkswagen has a higher attrition rate and have to spend a lot more compare to its
competitors on training and development of its employees.
 Days inventory is high compare to the competitors – making the company raise
more capital to invest in the channel. This can impact the long term growth of Volkswagen
 Limited success outside core business – Even though Volkswagen is one of the
leading organizations in its industry it has faced challenges in moving to other product
segments with its present culture.

C. Opportunities of Volkswagen – External Strategic Factors

 The market development will lead to dilution of competitor’s advantage and enable
Volkswagen to increase its competitiveness compare to the other competitors.
 Economic uptick and increase in customer spending, after years of recession and
slow growth rate in the industry, is an opportunity for Volkswagen to capture new
customers and increase its market share.
 New trends in the consumer behavior can open up new market for the Volkswagen .
It provides a great opportunity for the organization to build new revenue streams and
diversify into new product categories too.
 Decreasing cost of transportation because of lower shipping prices can also bring
down the cost of Volkswagen’s products thus providing an opportunity to the company -
either to boost its profitability or pass on the benefits to the customers to gain market
share.
 Government green drive also opens an opportunity for procurement of Volkswagen
products by the state as well as federal government contractors.
 Stable free cash flow provides opportunities to invest in adjacent product segments.
With more cash in bank the company can invest in new technologies as well as in new
products segments. This should open a window of opportunity for Volkswagen in other
product categories.
 The new technology provides an opportunity to Volkswagen to practices
differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal
 customers with great service and lure new customers through other value oriented
propositions.
 The new taxation policy can significantly impact the way of doing business and can
open new opportunity for established players such as Volkswagen to increase its
profitability.

D. Threats Volkswagen Facing - External Strategic Factors

 The company can face lawsuits in various markets given - different laws and
continuous fluctuations regarding product standards in those markets.
 The demand of the highly profitable products is seasonal in nature and any unlikely
event during the peak season may impact the profitability of the company in short to
medium term.
 Increasing trend toward isolationism in the American economy can lead to similar
reaction from other government thus negatively impacting the international sales.
 New technologies developed by the competitor or market disruptor could be a
serious threat to the industry in medium to long term future.
 Rising pay level especially movements such as $15 an hour and increasing prices in
the China can lead to serious pressure on profitability of Volkswagen
 Growing strengths of local distributors also presents a threat in some markets as the
competition is paying higher margins to the local distributors.
 No regular supply of innovative products – Over the years the company has
developed numerous products but those are often response to the development by other
players. Secondly the supply of new products is not regular thus leading to high and low
swings in the sales number over period of time.
 Imitation of the counterfeit and low quality product is also a threat to Volkswagen’s
product especially in the emerging markets and low income markets.

 Limitations of SWOT Analysis for Volkswagen

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does
have its share of limitations.

 Certain capabilities or factors of an organization can be both a strength and

weakness at the same time. This is one of the major limitations of SWOT analysis . For
example changing environmental regulations can be both a threat to company it can also be
an opportunity in a sense that it will enable the company to be on a level playing field or at
advantage to competitors if it able to develop the products faster than the competitors.
 SWOT does not show how to achieve a competitive advantage, so it must not be an
end in itself.
 The matrix is only a starting point for a discussion on how proposed strategies could
be implemented. It provided an evaluation window but not an implementation plan based
on strategic competitiveness of Volkswagen
 SWOT is a static assessment - analysis of status quo with few prospective changes.
As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive
environment may not be revealed in a single matrix.
 SWOT analysis may lead the firm to overemphasize a single internal or external
factor in formulating strategies. There are interrelationships among the key internal and
external factors that SWOT does not reveal that may be important in devising strategies.

 Weighted SWOT Analysis of Volkswagen

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate
managers decided to provide weightage to each internal strength and weakness of the firm.
Organizations also assess the likelihood of events taking place in the coming future and
how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT
analysis because with Weighted SWOT Analysis Volkswagen managers can focus on the
most critical factors and discount the non-important one. It also solves the long list
problem where organizations ends up making a long list but none of the factors deemed too
critical.

1.7 PRODUCT LIFE CYCLE

The product life cycle is an important concept in marketing. It describes the stages a
product goes through from when it was first thought of until it finally is removed from the
market. Not all products reach this final stage. Some continue to grow and others rise and
fall.
The theory of a product life cycle was first introduced in the 1950s to explain the expected
life cycle of a typical product from design to obsolescence, a period divided into the phases
of product introduction, product growth, maturity, and decline. The goal of managing a
product's life cycle is to maximize its value and profitability at each stage. Life cycle is
primarily associated with marketing theory.

 1.7.1 How Product Life Cycles Work

A product begins with an idea, and within the confines of modern business, it isn't likely to
go further until it undergoes research and development and is found to be feasible and
potentially profitable. At that point, the product is produced, marketed, and rolled out.

The product introduction phase generally includes a substantial investment in advertising

and a marketing campaign focused on making consumers aware of the product and its
benefits. Assuming the product is successful, it enters its growth phase. Demand grows,
production is increased, and its availability expands.

As a product matures, it enters its most profitable stage, while the costs of producing and
marketing decline. However, it inevitably begins to take on increased competition as other
companies emulate its success, sometimes with enhancements or lower prices. The product
may lose market share and begin its decline.

The stage of a product's life cycle impacts the way in which it is marketed to consumers. A
new product needs to be explained, while a mature product needs to be differentiated from
its competitors.
 1.7.3 STAGES OF PRODUCT LIFE CYCLE

1. INTRODUCTION
This is the stage where a product is conceptualized and first brought to market. The goal of
any new product introduction is to meet consumers' needs with a quality product at the
lowest possible cost in order to return the highest level of profit. The introduction of a new
product can be broken down into five distinct parts:

 Idea validation, which is when a company studies a market, looks for areas where
needs are not being met by current products, and tries to think of new products that
could meet that need. The company's marketing department is responsible for
identifying market opportunities and defining who will buy the product, what the
primary benefits of the product will be, and how the product will be used.

 Conceptual design occurs when an idea has been approved and begins to take shape.
The company has studied available materials, technology, and manufacturing
capability and determined that the new product can be created. Once that is done,
more thorough specifications are developed, including price and style. Marketing is
responsible for minimum and maximum sales estimates, competition review, and
market share estimates.

 Specification and design is when the product is nearing release. Final design
questions are answered and final product specs are determined so that a prototype
can be created.

 Prototype and testing occur when the first version of a product is created and tested
by engineers and by customers. A pilot production run might be made to ensure that
engineering decisions made earlier in the process were correct, and to establish
quality control. The marketing department is extremely important at this point. It is
responsible for developing packaging for the product, conducting the consumer
tests through focus groups and other feedback methods, and tracking customer
responses to the product.
  Manufacturing ramp-up is the final stage of new product introduction. This is also
known as commercialization. This is when the product goes into full production for
release to the market. Final checks are made on product reliability and variability.

In the introduction phase, sales may be slow as the company builds awareness of its
product among potential customers. Advertising is crucial at this stage, so the marketing
budget is often substantial. The type of advertising depends on the product. If the product
is intended to reach a mass audience, than an advertising campaign built around one theme
may be in order. If a product is specialized, or if a company's resources are limited, then
smaller advertising campaigns can be used that target very specific audiences. As a product
matures, the advertising budget associated with it will most likely shrink since audiences
are already aware of the product.

2. GROWTH
The growth phase occurs when a product has survived its introduction and is beginning to
be noticed in the marketplace. At this stage, a company can decide if it wants to go for
increased market share or increased profitability. This is the boom time for any product.
Production increases, leading to lower unit costs. Sales momentum builds as advertising
campaigns target mass media audiences instead of specialized markets (if the product
merits this). Competition grows as awareness of the product builds. Minor changes are
made as more feedback is gathered or as new markets are targeted. The goal for any
company is to stay in this phase as long as possible.

It is possible that the product will not succeed at this stage and move immediately past
decline and straight to cancellation. That is a call the marketing staff has to make. It needs
to evaluate just what costs the company can bear and what the product's chances for
survival are. Tough choices need to be made—sticking with a losing product can be
disastrous.

If the product is doing well and killing it is out of the question, then the marketing
department has other responsibilities. Instead of just building awareness of the product,
the goal is to build brand loyalty by adding first-time buyers and retaining repeat buyers.
Sales, discounts, and advertising all play an important role in that process. For products
that are well-established and further along in the growth phase, marketing options include
creating variations of the initial product that appeal to additional audiences.

3. MATURITY

At the maturity stage, sales growth has started to slow and is approaching the point where
the inevitable decline will begin. Defending market share becomes the chief concern, as
marketing staffs have to spend more and more on promotion to entice customers to buy the
product. Additionally, more competitors have stepped forward to challenge the product at
this stage, some of which may offer a higher-quality version of the product at a lower price.
This can touch off price wars, and lower prices mean lower profits, which will cause some
companies to drop out of the market for that product altogether. The maturity stage is
usually the longest of the four life cycle stages, and it is not uncommon for a product to be
in the mature stage for several decades.

A savvy company will seek to lower unit costs as much as possible at the maturity stage so
that profits can be maximized. The money earned from the mature products should then be
used in research and development to come up with new product ideas to replace the
maturing products. Operations should be streamlined, cost efficiencies sought, and hard
decisions made.

From a marketing standpoint, experts argue that the right promotion can make more of an
impact at this stage than at any other. One popular theory postulates that there are two
primary marketing strategies to utilize at this stage—offensive and defensive. Defensive
strategies consist of special sales, promotions, cosmetic product changes, and other means
of shoring up market share. It can also mean quite literally defending the quality and
integrity of your product versus your competition. Marketing offensively means looking
beyond current markets and attempting to gain brand new-buyers. Relaunching the
product is one option. Other offensive tactics include changing the price of a product (either
higher or lower) to appeal to an entirely new audience or finding new applications for a
product.
4. DECLINE

This occurs when the product peaks in the maturity stage and then begins a downward
slide in sales. Eventually, revenues will drop to the point where it is no longer economically
feasible to continue making the product. Investment is minimized. The product can simply
be discontinued, or it can be sold to another company. A third option that combines those
elements is also sometimes seen as viable, but comes to fruition only rarely. Under this
scenario, the product is discontinued and stock is allowed to dwindle to zero, but the
company sells the rights to supporting the product to another company, which then
becomes responsible

e — pr11..7.4.Product life cycle of- volkswage Beetles,1933-

2003
Be the VW Beetle is considered fondly as a highly successful product from a

bygone era. The fifi rst Beetles were far too noisy, ineffificient and uncomfortable

for the current vehicle consumer. However, it was possibly one of the most

successfully marketed and most famous cars ever built.

In 1933, Adolf Hitler ordered Ferdinand Porsche to develop a German

volkswagen, which means ‘people’s car’. The car was fifi rst built by Porsche’s

chief designer and went on to become the longest running, most produced,

single-design production motor vehicle in history.

During the introduction phase, the car was a basic vehicle capable of

transporting two adults and three children at 100 kilometres per hour. The car

was to cost about the same as a small motorcycle. After World War II, in 1945,

the VW factory was handed over to the British to control.

The car was called a kafer (meaning ‘beetle’) by the Germans, which explains

its popular English nickname. The British army ordered 20 000 Beetles and

production rose to 1000 per month. Unlike other cars at the time, the Beetle

was cheap to maintain and run. In 1957, a new larger rear window proved to be

very popular with consumers. Sales continued to climb.

During the growth phase, there were small improvements made to road

handling and engine power and, in 1955, the one-millionth Beetle was made

at the German plant. The Beetle was far superior in performance and reliability

to its competitors in the compact car market. These included the famous British

Morris Minor and the French Citroeë n. The VW’s market share expanded in

Europe.

The maturity phase began in the early 1960s when side and front windows

were enlarged. A newer, more powerful 1300 cc engine was added to

distinguish the Beetle from competitors such as the Morris Mini Minor.

In 1973, the Super Beetle was given a curved windscreen. Innovative

advertising campaigns and a reputation for toughness and reliability helped the

Beetle surpass the production levels of the famous Model T Ford. The Beetle was

now being produced in factories all over the world, including Australia, where

they were considered among the best VWs in the world. By 1973, production

had passed 16 million cars with huge sales on every continent. Incredibly, by

1992, 21 million Beetles had been built.

The popularity of the VW Beetle began to decline as rival small car

manufacturers from Japan and the US eventually overtook the Beetle in terms of

technology. Attempts by VW engineers to improve the model’s popularity had

failed and the Beetle’s worldwide sales began to fall. Other VW cars like the Golf

became more popular with consumers.

In 1978, production stopped in Germany, but was continued in Brazil and

Mexico. Parts were exported from South America even after full production

ceased in 2003. However, a car that resembles the old Beetle is now on the

market and referred to as the ‘new Beetle’. The Volkswagen logo is still world

famous and the company remains Germany’s largest car maker to this day.