Friday, June 24, 2005

Extra Credit Post #2 - Comment/Expansion on Classmate's Post

Please see my June 3 post, "Walmart Sponsors Reality Show!" This makes a reference and has a link to Alex Husted's June 1 post on Robert Greenwald taking on Walmart.

Comments on Classmates Blogs

For the record, I commented on these posts:

Tammy Gowans

Xinkai Kong

Annamarie Horan

Melody Lai

Jenny Castellano

Sheharyar Shaikh

Andre Grachev

Thursday, June 23, 2005

Team Post #2 - P&G is on Annamarie's Blog

Read more on Annamarie Horan's blog.

Wednesday, June 22, 2005

Topic Post #3 - Franchising Around the Globe

Kotler and Armstrong discuss the franchise organization in Chapter 13 (p.406). Franchises have gone global! Here is an interesting article that I found through The Global Small Business Blog that details how prospective franchisees are training for business ownership. What's notable about this article is that US franchisees are traveling abroad to hook up to franchise scenes in countries like Australia, Canada, and Japan. There's been a flood of foreign franchise concepts into the US, including refilling ink-jet and laser cartridges, exotic food restaurants, and pet training and grooming services.

You probably know that franchising is a US tradition, with its roots in the 1860s and the Singer Sewing Machine Co. It really took off as a business concept in the early 1900s with GM franchised dealerships. Soft drink bottlers, and the auto and gasoline industries were big franchisers by the 1930s. Now we've got franchises for dozens of concepts including day spas, pet grooming services, and realty companies (I just discovered Wal-Mart Realty).

This articles discusses the franchise market and the challenge of going global. Some of the trouble seems to come with adapting the company's product, as well as unfamiliarity with brand names and products. We talked a lot about these issues as we explored global marketing in class. Some of the foreign franchises will have to change their methods and menus (although the chicken sounds delicious), deal with territory issues, and business registrations and legal fees, but there can be a lucrative payoff. Check out the last paragraph of the article.

If you feel that franchising is your true calling and you enjoy travel, see these websites: Pollo Campero, Kumon Math, or Koya Japan.

Tuesday, June 21, 2005

Extra Credit - Where Is Linda's Blog?

Everywhere! Check me out on:

Response to the Other Alex - Chery Autos

Response to the other Alex -- Too bad they didn't have that promotion when I was in college. Cheap, unreliable cars were all the rage (Chevy Vega, Ford Pinto, anything from AMC), and we would have been all over that.

Response to Andre's Comments on Chery Cars

I completely agree on the safety vs affordability issue. I would add that Americans are becoming increasingly concerned about gas mileage although gas prices here are far cheaper than they are in other parts of the world. Price is not an issue. There are so many ways of financing auto purchases these days! Plus, one point that I did not have an opportunity to mention during the presentation - anyone who wants the luxury of a BMW will pay for the BMW because being able to show your friends and co-workers that you can afford the BMW is part of the allure.

Monday, June 20, 2005

Response to Daniel's 6/20/05 Comments

Thanks Daniel.
This is a fascinating story, and one that seems to change weekly. Your comments shed a little more light on the Chinese market for cars.
I do believe that China can overcome the American perceptions of inferior quality, but I am very interested in finding out more about how American auto workers feel about China's plans. On Visionary Vehicles' website, under FAQs, the issue of American jobs is addressed -- briefly. This issue could pose another challenge for them, but Chery has an answer for that, and has posted its plans to add hundreds of thousands of jobs once they open auto plants in the US.

Friday, June 17, 2005

Topic Post #2 - Global Marketing - Chery Automobile Company

Have you ever heard of the Chery Automobile Company? If not, chances are you will soon. This little known eight year old Chinese auto manufacturer has ambitious plans to enter the US auto market within the next two years. I learned about this company and its plans from an article from feedster and was intriqued enough to learn more about it. Plus, I'm in the market for an inexpensive new car.

Chery is based in Wuhu, China in the Anhui province. Its name translates into "Qi Rui" which means "unusually lucky" in Chinese. It produced its first automobile five years ago, and only produced 80,000 cars in all of 2004. This is one of the reasons why its plans to enter the US market are so fascinating.

Chery plans to manufacture and ship 250,000 low-cost, feature packed sedans and SUVs that look and perform like high-end European and Japanese luxury vehicles to the US by 2007, and one million within another five years. Four of the five models are priced below $20,000. Chery will enter the US through a joint venture (Kotler and Armstrong p.610) with Visionary Vehicles.

Malcolm Bricklin, head of Visionary Vehicles, is recognized as one of the automobile industry's leading entrepreneurs and one of the most experienced automotive importers and brand builders in the industry. He founded Subaru of America in the late 1960s, but he is probably best known for bringing the Yugo to America. He is very bullish on the Chery, and has built a team of international experts to ensure its success. For example, he has partnered with Italian coach builders Bertone and Pininfarina to design luxurious interiors, and with Japanese and with AVL List GmbH Austria to develop powerful engines. Some of his other team members include Allen & Company LLC, investment bankers, who will act as financial advisors; John Cavanagh, former Vice Chairman of AMEC Construction Management, Inc., whose projects include the Sears Tower, the NY Stock Exchange, and Terminals One and Four of JFK Airport.

Chery faces a number of challenges in its plan to enter the US auto market, the first of which is American consumer reluctance to buy Chinese cards from an unfamiliar company. Business Week online states that locally sold QQs have 374 problems per 100 vehicles vs the '04 US average of 118 problems per 100. Conventional wisdom says that low quality is a factor that will keep Chinese auto exports to the US and Europe in the novelty category for a few years. Remember the early days of the Hyundai?

Their next challenge is a $10 million lawsuit filed against them by GM's South Korean unit accusing them of ripping off the design for its best selling QQ minicar. Chery denies the allegations and the case is unresolved.

Chery also has to search for US dealerships. According to Driving Today, the company is planning to develop a consumer friendly self-standing dealership, and has engaged an international architectual firm, Swanke, Hayden, Connell Ltd to design the model for the dealerships. Check out the model dealership on Visionary Vehicles' website. Bricklin has high aspirations for the Chery dealers; his plan calls for each dealer to invest at least $15 million in what he describes as "destination dealerships."

Another challenge is meeting US safety and emissions standards without a global partner who is experienced in meeting US standards. According to theautochannel Visionary Vehicles has partnered with Detroit-based emissions and safety certification experts Pilot Systems LLC to meet this challenge. Pilot Systems will handle all aspects of safety engineering for and approval of vehicles entering the US market. They will also develop a working team of scientists, technology experts and environmental professionals to assist.

High component costs are another stumbling block and a huge challenge for their supply chain. China remains a huge importer of auto components, especially high end parts such as engines and transmissions. Tariffs on these parts can be as high as 20%, in addition to shipping costs. Kotler and Armstrong define a tariff in Chapter 19 as "a tax levied by a government against certain imported products." (p.598) Volkswagen Group China notes that while labor only accounts for 6% of production costs, materials gobble up 85%. Potential kinks in the supply chain -- definitely.

Although I could not find a plan for Chery to address the tariff issue, there are folks in the automotive industry who feel that this is only a small bump in the road. Jack Perkowski, CEO of ASMICO Technologies, which owns 13 parts factories in China, figures that the tariffs will change once the domestic market gets closer to 10 million units per year.

Chery has near-zero brand recognition outside of China. Visionary Vehicles recently launched a website, but designs for four of the five cars it plans to introduce have been kept a secret.

I believe that Chery has an outstanding opportunity in the US market, and I admire their ability to think big. The company's plans to enter the US market stem from slowing growth in the Chinese market, and with two and three car families being the norm in the US, there is great potential for Chery's success. Malcolm Bricklin may be a visionary, but he could be a liability. Between the failure of the Yugo and his less than stellar performance in launching his own sports car, he doesn't inspire confidence. Chery has a lot of challenges, and my casual conversations with friends lead me to believe that these autos will be a tough sell, primarily because of perceived product inferiority.

Will they make it? Are they next Toyota or are they the next Pinto?

To ensure its success Visionary Vehicles should put together a marketing team which engages all parties in the current supply chain, and begin to develop a marketing strategy for their strategic plan. Although there is no product yet, it's not too soon.

Wednesday, June 15, 2005

Team Post #1 P&G India - Social Responsibility in the Global Marketplace

P&G is firmly committed to global social responsibility, and shares two strong examples in its company literature. One of P&G’s tenets is that they are good corporate citizens; their global cause credo is “P&G Live, Learn & Thrive.” P&G India has launched many initiatives to develop its communities. One is Project Shiksha, an education initiative that has been launched across the country. According to the P&G India website, that country has the largest number of children without access to education; two-thirds of them are girls. For Project Shiksha P&G partnered with Sony Television to appeal to its consumers and viewers to support the cause. All an individual has to do is to buy a package of Tide, Ariel, Pantene, Head & Shoulders, Rejoice, Vicks VapoRub or Pampers during April, May and June and that purchase will help support one day’s education for one child per pack purchased. Shiksha is being supported by some of India’s leading actors such as Kajol, Mandira Bedi, and Revathy, as well as singer Sonu Nigam and tennis prodigy Sania Mirza.

In its latest Annual Report, P&G India describes the work it’s done with village Satlapur Panchyat, where one of their plants is located. They’ve expanded the local school, secured donations of books and computers, and donated hand pumps for drinking water. The company statement from the 2004 Annual Report, “We believe we have made a meaningful difference to the lives [of the villagers] and will continue to demonstrate our commitment to the community not just through the quality of our products and services, but also through socially responsible initiatives that improve their lives” (p9 – P&G Hygiene and Health Care Limited Annual Report 2003-2004).

Some of their past initiatives have included Peace – an environmental program, Future Focus – a career guidance service, and Project Poshan – with UNICEF to combat malnutrition. P&G India has received numerous awards for its humanitarian work, and is consistently voted among India’s Best Employers.

Another quote from their website summarizes their strategy for social responsibility. They "believe in building the community in which we live and operate by supporting its ongoing development." After the events of Bhopal (Union Carbide) of 20 years ago, and the ongoing controversy over the remaining pollution and welfare of the survivors in that village and the constant feed of news stories about corporate accountability around the globe, it is clear that some companies value place and community and can see the connection between corporate care and corporate profits.