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Strategy and Target Market Selection for Car Customization Business (Part 02)
Golam Moula Mondal
This is Md. Golam Moula Mondal. I have completed BBA (Major in Finance and Banking) from Patuakhali Science and Technology University. 
By Golam Moula Mondal
Published on 24 October 2012
Market Overview, Industry Size and Growth, Long Term and Short Term Strategy and Target Market Selection for Car Customization Business

Market Overview, Strategy and Target Market Selection for Car Customization Business

3.1    Industry Size and Growth Information: According to F1 .2007 campaign, there were already 10,031 existing customized cars which participated in the campaign. All of them either have both body-kit and engine up gradation or body-kit up-gradation. According to Fl 2006, this figure war 7,231 existing customized cars participated in the campaign. So, we get a good growth rate of 39.19%. Again, the same analysis reveals the fact that, in case of F1 2005 campaign, there were already 14,591 existing customized cars which participated in the campaign. According to F 1 2008, we get a good growth rate of 43.19%. And this growth rate is accelerating by 10% rate. This reveals a mile-stone in anticipating our target customers demand most explicitly that the industry is in embryonic stage and yet we have a lot of business to do in order to satisfy the demand.

3.2    Strategy: The following strategies for marketing are emphasized-

3.2.1    Short term strategies:
- Product innovation
- Learning Effects & Material Management
- Just in time material management
- Training

Our strength of the business is the innovativeness. We will offer the customers what they can only dream of having. Due to increasing demand of the customized car in the local market, our company will be able to keep per unit cost at a moderate level. Labor productivity will increase over time as they will be more acquainted to the production process and per unit labor cost will fall. As a result our company will learn the most efficient way to perform any task. Our unit cost and cost structure will fall with increases in accumulated output. Improving the efficiency of the materials management function typically requires the adoption of a just in time inventory system this is exactly what we have done to our inventory holding system. The just in time process will enable us to come up with better wand efficient means of delivery of supplies throughout the production process let it be a day or a month of accumulated orders. Our employees are major input into the production process that will be trained to perform their tasks faster and more accurately.

3.2.2    Long term strategies:
a.    Functional Level Strategy:

- R&D Strategy and Efficiency: To suit the competitive forces acting on the industry it is best appropriate for us to focus on research and development. The other way we could actually counter the competition is to increase the efficiency of production and manufacturing. We have already noted the important points on how to reduce the unwanted and avoidable situations. Through increasing focus production line and technical capabilities we can overcome this matter. This stage of the industry life cycle phase forced us to apply this stroke of strategy to come up with better innovativeness in every step of the operational process starting from the designing facility to the evaluation system for peer management to marketing management.

- Supply Chain Management: Our production process gave rise to the system of just in time supply management. The production process is set up in such a way that using such a supply management system will give rise to no problems in maintaining inventory management. Even though the transportation costs come in action for those raw materials that we have to continuously keep on transporting from a location which is relatively far away from our factory location. But at the same time we also have to keep in mind that we are in fact identifying the realized need of our production management and limitations. In other words we are also focusing on producing those numbers of products that are already ordered for and are ensured to sell. This way we virtually have no inventory left over after a day's sales.

- Customer Responsiveness: Another way of coinciding and meeting our expected demand of our selected market is through customer responsiveness. In fact, the nature of our business itself is dependent on customer feedback and responsiveness. The use of CAD generates customers' preference if they are willing to incorporate themselves into the job. Moreover, we have set a few modes undergoing this particular strategy, one of which could be after-sales service for extended period of time.

- Extensive focus on Promotion: Extensive focus on promotion increases the perceived value of our service. Brand recognition and our existence with the target group may also produce some by-product customer segment, which may boost extra profitability to our organization. Moreover, it may lead to more profitable customer segment that might not yet realize.

b.    Business Level Strategy
- Focused Differentiation strategy: We are actively pursuing the focused differentiation strategy as we are focusing on offering unique or distinctive product or services to only one group of customers (18-34 years; male) in Niche Market. Our marketing research through various methods either primary or secondary has shown potential growth once the product is revealed in that particular segment.

- Strong Competitive Positioning: Another business-level strategy is to provide superior service in through benchmarking pricing strategy.

c.    Corporate Level Strategy
- Strategic alliance with suppliers: As we have mentioned before that the bargaining power of suppliers is at a minimum, this would give us the upper hand in determining the cost of the raw materials mostly. As we need the raw materials at a steady pace in fact almost everyday, the rise in operational costs which is the transportation cost of delivering supplies would increases. To take care of such a matter, we need to come up with a strategic alliance with those suppliers depending on the benefits that each would provide. Thus developing our corporate strategy this way would enable us to get further benefits and a cutting edge with the business.

- Vertical backward Integration: The sole reason for creating a strategic alliance with the suppliers is to increase the production rate and efficiency per unit cost. The labor performance would not depend on this matter. But not always is the strategic alliance a good idea for an industry like this where the growth stage has just begun. This means we should get to know the companies who are actually selling the raw materials in Bangladesh through dealers. Getting dealership having a brand identity would allow us to influence such a distribution channel which is might very well be licensing as well. This way we could get the raw materials by ourselves and save us the double taxation. Price imposed by those sole dealers.

- Diversification: As we carry out our business-in the long run it is uncertain that where the demand might become stagnant. To recover instantly if a contradiction happens with demand takes place; we should be ready for handling such situation. Diversification is a way to make sure that even though the products we sell cannot be differentiated further; we could always become a multinational company producing products and services for related or unrelated industries. By the time this contingency becomes a necessity, we would be having a well reputed brand name and in order to sustain that licensing with other companies in related and unrelated industries could be a good idea not only for promotion and wake up calls, but also act as an existence in various industries.

3.3 Target Market Selection
3.3.1   Factors Influencing Target Market Decision:
- Stage of product Maturity: Product Maturity has reached in the developing stage. Even though the product has been disclosed to a lot of audience because of the cable-TV facility that showed several movie over car customization and up-coming and recent TV shows like "Pimp My Ride", "Soop¬up Cars", still the product and service have yet not been flaunted to most of the people because of the heavy dependence to subcontinent Hindi and Pakistani TV-channels. According to the SRTA report of 897543 existing cars in Sri Lanka, not even 0.5 % cars have been customized.

- Extent of Diversity in buyer preference: As being discussed in the Car-Industry Analysis in "SRTA and SBS analysis" of the Secondary Data Analysis, the reasons and scope of diversity in buyer preference is explicit. The extent to which this thing accumulated to buyer preference will influence, can rather be explicit by the awareness call and its effectiveness. As far as Industry Expert, Secondary Data and Primary Data signal, the buyer preference to unique designing is nigh and less price sensitive. The actual trend can be explicitly measured at the beginning of the operation.

- Industry Structure: The Industry is in "Emerging stage", meaning the number of farm in the Industry is really very few, and the farm sizes are relatively small. Least investment has been posed. Barging power on supplier is really low or moderate as production and servicing is low. Imported goods are rather competing with the industry. Even the Merchandizing farms are low in number to compete against the manufacturing and service industry. Altogether, this is still under emergent industry to be developed.

- Organizational Capabilities and resources: Our organization as a whole is a relatively bigger player in the market as the financial asset and investment is large in the market Investment. As the resource is high. The same goes for the risk, as the profitability largely unproven in the market-place. But, having bigger investment can build bigger resource like interactive marketing department, strong financial capabilities, influencing the demand curve, and more capability and capacity, and early experience to utilize learning curve. Moreover, most of the cases 1st movers have Brand Loyalty, if their dedication lies on product quality to greater satisfaction to the customer or cost-leadership or any other competitive advantage.

- Opportunities for gaining competitive Advantage: As "Competitive Advantage" can be achieved from either any of the activity of the value chain or several of them, we believe to comply our value creation activity in every activity as per the main competition seems to be steering in the import goods. Even though being customized designing gives a cutting edge, the technological laggardness can cut us short because of the low price with technological change if we don't comply with the technological improvement.

- Price sensitivity: Price sensitivity is the most crucial part. As we need a high asset turnover rate and making a closer break even point to become profitable. As the research finding, the least price sensitive is entrepreneur and then corporate level and lastly students of private Universities in Sri Lanka. This may need critical analysis of whom to select to be more profitable in the initial and the long term basis and which segment are more risk oriented, and whether we have a back-up strategy of switching Target market.

- Setting Target Market: Our Target market, first of all, would be higher-middle to higher-higher class people, who are relatively less price sensitive as the initial profitability will boost us to faster turn-over and break-even position is required. Secondly, We would rather prefer students and aware entry-level corporate as they are already motivated and we have very less to do in persuading them to become our customer, their age group as they are students an entry-level corporate, it will be 18-36 that we prefer to be most trendy and disclose the attitude sports-loving mentality as well as individualistic. This is also to be noticed that, we as being focusing to our target market, not necessarily be able to come across a very profitable business plant, unless otherwise we also focus to the need of different age-group of entrepreneur and corporate as they are most likely to be members of repeat purchase and mostly brand loyal in nature. So our tool to different age group, other than the initial focus, may rather be varying as the business itself delivers customized goods and servicing in its nature of high pricing option.

- Marketing & Sales: We believe the positioning of a new good or service is the most critical and crucial factor in the industry. As there are so many options and so many ways customers are attached to different promotion of different product and service, it's really hard to emphasize exactly one. Rather an Integration of Marketing Campaign is most likely to give ways to maximum success. But how to determine, even though can be tracked and evaluated is a real challenge for start-up awareness and Brand-recognition and Brand¬ value preference.

- Positioning Concept: Positioning concept has two functionalities: setting awareness and recognition in the target customer in a preferable way, and secondly, leading to the pathway of high Brand Image and retaining customer loyalty through both existing and new target market. This objective leads to the pathway of positioning strategy.

- Positioning Strategy: The combination of marketing actions used to communicate the positioning Concept, which is known as positioning strategy, is a very crucial strategy for start-up business plant in the developing stage.

- Positioning effectiveness: Positioning Effectiveness is the process of tracking the cost and productivity of the retaining integration aid component-wise evaluation strongly monitor the effectiveness, change weight and again re-implement several marketing tool as per focusing and interacting Target customer.

- Promotion Campaign Strategies: Our strategy is to go for intermediary marketing, along with sales promotion. The reason of combining is explicitly related to pricing strategy. As we are about to charge premium price, as differentiation itself is such a type, the profit margin has to be high, so that we can at a time raise the profitability as the target customer is less likely to be susceptible to premium price as the initial capacity is limited. On the other hand, we may either face Target Market defection if we increase the price suddenly, leaving a bad name and worse Brand-image.