Free Business Essays -European Car Market
In line with the requirements for operation of the April Executive 2000 Business Simulation and given that you are launching a new company into the European car market you are to produce the following:
1) An initial business plan and associated prospectus (35%) Maximum number of 1500 Words (plus data & appendices)
The business plan should address:
‑ Mission and strategic objectives of the organisation
‑ Market context of the operation of the proposal
‑ Organisational and structural aspects including key resources
‑ Financial aspects ‑ pledged capital £500m
‑ Rationalised product offering
Business Plan:
Mission Statement
The primary goal of the organisation is to provide affordable, practical and fun automobiles to our customers all over the European market. Our organisation will try to become a market leader within the industry. To do this we will try to meet the ever-changing needs of the customer. We will also try to become a leader in the environmental concerns of the industry. We will endeavour to produce engines that are environmentally friendly, but at the same time practical and affordable.
Strategic Statement
The strategy of the company will be to target the lower-medium sector in the car industry. This sector is considered to be one of the largest sectors in the industry and includes a large diversification of customer. Automobiles in this sector will appeal to a wide range of customer. These include the first-time drivers that have just passed their driving tests to the family person who is looking for practicality. To fulfil our environmental goals we will invest and develop into the area of the environmental engine. These include such ideas as the hybrid car and alternative fuel sources such as natural gas and solar power. As a result the company intends to invest substantially into the research and development of this area.
Promotion of the new products will be over a wide variety of mediums. Promotions will be used on the tradition mediums of TV, radio and newspaper. However, to supplement this, Internet advertising will also be used. This form of advertisement is already popular and is rapidly growing. This form of media allows the advertisement to be more adventurous and eye catching due to the lower restrictions governing Internet advertising.
Market Overview
As mentioned before the target market is the European Car Industry. More specifically the company will be competing in the lower medium car sector of this market. This is a highly competitive market; however, it does contain a large number of potential customers. This market, particularly this sector, has many rival companies and many different models to suit the individual needs of the consumer. The leader in this sector is Volkswagen (VW) and in particular their leading model the Golf. Leading reports on the motor industry show that the Golf has got a 27.2% share of the sector. This will be partly down to the design and reliability of the car, but some of this share will be down to the name and the history of the car. This was achieved by selling 69,784 cars in 2004.
Environmental cars are becoming more popular every day. These environmental cars include cars that have dual fuel sources. These are known as the hybrid car. A report on the website MixedPower.com states that Toyota intends to increase the sales of its hybrid car by a third in the coming year to 20000 units. This will be followed by increased sales in all of the different manufacturers hybrid cars. This seems to be the future of the motor industry. This will be due to the lowering of the world’s natural resources and the fluctuating price of oil.
The overall motor industry in Europe is pretty stable. The demand for cars is as high as ever. The problem in the European market is that of over production. According to a report by BBC news, European car manufacturers can produce 6 million more cars a year that can be sold. The problem here is that the different car manufacturers have to run their own production plants to full capacity to make profit. Having looked at this our company will have to decide upon a level of capacity that does not cause this problem.
Product Offering
In this section I will outline the type of models that the company will initially offer. I have decided to target the lower medium sector of the industry. I decided to target this sector due to a number of reasons. The first reason is that this sector is one of the biggest in the industry. It has a lot of competition including VW, Ford, Renault and Fiat. Within the sector there are many models including the Golf, Polo, Fiesta, Focus, Clio, Megane and many more.
The second reason for targeting this sector follows on from the first and is that the many different models in the sector appeal to a wide range of individuals. This sector will attract the drivers that have recently passed their test and are looking for their first car. These can be individuals who are looking for something small yet practical and individuals that are looking for power (known as boy racers). Also, the higher range model in the sector will appeal to the family person. This is because the higher range cars will be larger (5 door), have the practicality a family car needs and still be reasonably priced and fun to drive.
I have decided to offer models with the option of having a hybrid fuel supply. This is due to the increased market for environmental cars. This is due to the greater social responsibility society is taking on in the modern world. This greater social responsibility is being reflected in the fact that many companies are now producing social reports, therefore, this is an increased aspect of business that has to be acknowledged in the strategic planning of a company.
Taking the reasons above into account when launching the company I will intend to initially produce three models. These models will be a sports model (aimed at the younger customers), a 5 door model (aimed at the family) and a model that incorporates the hybrid designed fuel supply (aimed at the increased socially conscience individual).
The sports model will be aimed at the younger generation and will be designed so that added extras can be requested as and when the customer requires. These extras will include alloy wheels, turbo engine, spoiler, increased wheel arches, etc. This will appeal to the generation that wishes to personalise the car they are driving. I intend to supply these add-ons so that the customer has the option of buying direct from the manufacturer rather than searching around too much to find the item they require. Looking at the competition the price for this range will be between £7000 and £12000 depending on the engine size and added extras the customer might request.
The family model will have size, comfort and practicality. However, it will still be very reasonably priced. It will still meet the company’s mission goal of providing a fun drive. The type of family this car will appeal to will be the new family. The family that needs the practicality of a bigger car but still wants a fun and exciting drive. This particular model will have options such as increased engine size and automatic or manual gearbox. Based on similar competition the price for this model will be between £9000 and £18000. This is depended on the extras the customer requires.
The hybrid model will appeal to the more social conscience individual. It will still have the practicality and excitement of the other models, but will be better for the environment. This model reflects the growing trend in the industry.
I believe that a target of 40000 units of each model should be initially made. This is about the average number of units sold for each of the rival companies. Also, the figure will mean that if targets are not met then the profitability of the company will not suffer as much.
Organisational and Financial Structuring
Within any business the structuring is very important on how efficiently and effectively the company can operate. Within this organisation there will be many different departments all working as one to fulfil the goals of the company. The main department will be that of production. Initially I predict that one factory will need to be bought in order to produce the amount of cars required. I believe that the production of these cars should be split between 2 third workers and 1 third automation. Based on this 2760 workers will need to be employed. Also, 138 automation units will need to be purchased. These have the advantage of being sold on at the end of their operational life.
Another major department will be that of research and development (R & D). R & D will be especially important in this age, as there is a growing shift towards new, more environmentally friendly ways of fuelling a car. Initial outlay on R & D will be the investment on the new models. This costs £290m each at a total cost of £870m. Up to date market research and up to date data on competition will also have to be attained to increase competitiveness. These cost £5m each. Continuous R & D will give savings of 25%.
All of this will mean a total outlay of £1401.026m. This of course means that a loan will have to be taken out to cover the short fall in funds. This loan will cost 5% plus inflation and will be paid of over the coming years from sales of the cars.
Finance data
Average wage for 1 worker = 377*50 = £18850
No. workers = 2760
Wages per year = £52026000
No. units needed = 138
Cost of unit = £500000
Total cost = £69000000
References
BBC news
MixedPower.com
http://www.newcarnet.co.uk/newsarchiveitem.html?id=4416&pos=1
