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Saturn Case Study

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Autor:  anton  06 April 2011
Tags:  Saturn
Words: 2375   |   Pages: 10
Views: 328

Case Analysis #1

SATURN

Decision Focus

Saturn has tried to uphold its image as “a different kind of company” since its establishment in 1985. To do this, it has concentrated on creating and maintaining a strong relationship with its customers. The company was launched with a $5 billion investment with high hopes that a GM could reach a new market area with a new line of compact vehicles. The goal was to sell 80 percent of Saturn vehicles to people who otherwise would not have bought a GM product.

Saturn made their debut in the market for compact cars in 1990. By 1993 they were experiencing success in the already crowded market, selling nearly 230,000 vehicles. The next three years the numbers looked even more promising, averaging over 280,000 vehicles per year. Unfortunately, from 1997 to 1999, Saturn experienced a trend reversal and sales dropped to average around 235,000/yr. To combat this, Saturn concentrated on pushing their newer L-Series, which helped bring an increase over the following 3 years (widely helped by the expanding product lines).

Much of the struggle Saturn struggled (late 90s) was attributed to the lack of diversity in their product lines. The L-Series helped greatly during its first two years in 1999 and 2000, accounting for as much as one-third of total sales. In 2002, the VUE and the Ion began making an impression, and Saturn once again topped the 280,000 mark. Now Saturn is faced with keeping sales figures up, even though averages industry wide are dropping. It’s no secret that manufacturers are having some trouble consistently selling cars, and that makes it harder for Saturn to gain market percentage and sell more vehicles. Saturn must find how to sell more cars in order to gain and keep momentum in the vehicle market, which is expected to see dwindling sales in the upcoming year (Appendix Article 2).

SWOT Analysis

Strengths

• Unique identity as “A different kind of company, a different kind of car.”

• Reputation for satisfying customers

• Built from the ground up

• Part of General Motors, although fulfills a satellite persona

• Completely uses its own production lines

• Benefits from caring employee reputation

Weaknesses

• Small selection of vehicles

• Operates in a crowded market of compact vehicles

• Reputation as a “chick’s car”

• Small customer base

• Lack of variety when it comes to quality of product

Opportunities

• Currently changing market trends

• Still has image as a “newer” brand

• Not tied down to any image as a “cheap” or “expensive” brand

• General Motors has recently dissolved Oldsmobile, an upscale product line

Threats

• Currently in a dwindling market as vehicle sales are expected to drop

• Pressure from competitive import companies

• Track record brings a reputation as a company that misses trends

Alternative Choices

1. Crossbreed vehicles with other GM products and/or other lines in order to gain customers based on variety/price.

2. Increase money into advertising and distribution channels of vehicles with hopes that heightened awareness and availability will spark a rise in sales.

3. Concentrate on expanding Saturn to new design concepts and fresh vehicles, somewhat altering their image, but also coinciding with Saturn’s individual identity as “a different kind of car”.

Evaluation of Alternatives

1. Crossbreed vehicles with other GM products and/or other lines in order to gain customers based on variety/price.

Saturn is, of course, one of the well-known distribution arms of General Motors Corporation. This gives Saturn one of the world’s largest financial and intellectual pools to dip in, both when it comes to creating ideas and also when backing them. This gives them the opportunity to expand their vehicle selection not only by new design and production, but also by combining successful existing parts and designs from other GM vehicles with the Saturn spin. Also, Saturn already has been involving Honda engines in their designs, so this suggests that decision makers are not totally opposed to integrating other ideas to sell vehicles. General Motors has several lines they use to sell cars, trucks, and vans. The Chevrolet label carries vehicles such as Malibu and Impala Sedans, the Chevy Venture minivan and the S-10 pickup, and the more famous names like the Silverado pick-up, and of course the Camaro. Pontiac and GMC Dealerships are littered with models such as the Grand Am and Grand Prix, the Montana minivan, the Yukon and the increasingly popular Envoy. Buick offers a more luxurious option for drivers with options such as the Park Avenue and the Rendezvous, but GM offers the coup-de-grand selection of elegance and quality with the Cadillac Series. This gives a large sibling variety to Saturn’s role model selection, and if GM needed to answer a question Saturn asked they would have a lot of examples to answer with.

Hypothetically, it would make sense that any steps Saturn could take to cut costs and provide the market with a less-expensive vehicle should be taken. It is not uncommon for automakers to share frames among vehicles, such as the Ford Taurus and the Mercury Sable. Also, many vehicles share similar parts such as window motors and switches to cut down production, installation, and even training costs for mechanics and assembly workers. This helps lower the sticker price of the vehicles and makes them more affordable, hopefully attracting additional customers. General Motors needs to make sure they don’t get too stubborn as they did before, going almost nine years without giving Saturn a new product (Appendix Article 1).

However, one large part of Saturn’s history is their “different kind of car, a different kind of company” approach. This would mean that involving any other car lines could violate their slogan, and this may look hypocritical to some customers, especially if that customer was looking to get away from a certain type of car that was now collaborating with Saturn. The Saturn line was built up from scratch on its own strategy, and it was so important to give Saturn its own identity that even the factory was strategically located away from Detroit to give Saturn a unique identity characterized by smiling residents of Spring Hill, Tennessee.

2. Increase money into advertising and distribution channels of vehicles with hopes that heightened awareness and availability will spark a rise in sales.

The second alternative deals with a very basic strategy, increasing funding. The “it takes money to make money” approach could spark sales for Saturn, hopefully increasing the popularity of the line in general. In late 2004, Saturn had 454 dealers (Appendix Article 3). If there are more dealers in major cities and even in smaller, remote locations, the potential to distribute more cars would grow. Even in today’s growing age of information, when it comes to selecting a vehicle, many buyers don’t look much farther then their local car dealership. Dealerships are the major point-of-sale for car companies because customers have all of the information available, along with the vehicles themselves, and of course don’t forget the salesman suggesting -or pushing- the people buy the vehicles. An increase in the amount of dealerships would make the vehicles more accessible to the public, and this could also make current Saturn drivers happier by offering more service facilities.

Almost necessary with the increase in dealerships is an increase in advertising investment. Just because a new building pops up in someone’s area doesn’t mean they will be inclined to visit the establishment. Investing in advertising, especially in the areas the dealerships are placed, would raise awareness of the product that the potential customers are now exposed to. It would be necessary to invest a sufficient amount to properly express the angle that Saturn is trying to display alongside the investment in new dealership establishments. Hopefully the combination of new dealerships and a new ad campaign properly implemented in a well-researched marketing plan would pan out as a sufficient increase in sales.

Although the “it takes money to make money” approach is often a popular avenue for increasing a customer base and sales, it is not a sure-fire road to success. It must be noted that Saturn initially, in 1990, believed they could sell one-half million units a year, while they have never topped 300,000 in any year of their existence, and only sold 271,157 units in 2003 (Appendix Article 3). It may be wise to take this fact into account when making assumptions of how the public will respond to future advertising and dealership presence, since it would be very unfortunate to make the same mistake twice.

3. Concentrate on expanding Saturn with new design concepts and fresh vehicles, somewhat altering their image, but also coinciding with Saturn’s individual identity as “a different kind of car”.

This option would place more weight on the intellectual assets of Saturn. Instead of pushing themselves to increase the quantity of their products, this approach would necessitate concentration on improving the quality of their products instead. Saturn has consistently produced attractive looking vehicles at decent prices, they now need to produce a newer, more unique, must-have vehicle. If Saturn can fill a niche that only they can fill, then the popularity of the brand should expand, along with the customer base. One of Saturn’s dealership in Minnesota is even quoted as saying: “We needed new products five or 10 years ago” (Appendix Article 3).

Saturn has always prided on their reputation as “a different kind of car”, but in many instances, they can’t adequately compete with the Japanese vehicles. Taking this into consideration, it is possible that maybe Saturn has not been a different “enough” kind of car. American car companies have lost a lot of sales to imports because of price and available warranty coverage. Saturn can not always compete on these platforms, so they will need to differentiate on others such as style and performance if they want to compete.

Saturn’s identity has been their gloating point since their conception, and it is important not to forget this. They missed the boat on integrating SUVs into their line-up, so it is imperative to do their best to lead the next trend, not catch up to it. Automotive sales dropped in 2004, and with the amount of new cars on the road right now, there could very likely be a drop in sales in 2005 (Appendix Article 2). This should signal Saturn that they must be very serious about their next products, because they can not afford any more flops.

Now, while this option doesn’t shell out abnormal operating expenses such as excessive advertising or new building construction, new car designs do require investments of time and money involved in creating new ideas and making others aware of them. The most sensible aspect of this alternative is that it will be necessary for Saturn to produce new vehicle ideas anyways, and as long as they take the pressure seriously, they can succeed to the best of their ability. Saturn needs to gain for themselves some type of unique image as a niche brand, or at least add to their current image attributes, such as offering the customer a higher level of quality and prestige. The unfortunate fact is that the company is already over 15 years old, and reinventing themselves is going to be more difficult then if they would have taken a more favorable shape from the get-go.

Decision

Focusing on the direction a company is going is a constant aspect that must repeatedly be addressed. Looking at the three alternative options discussed here, it appears to me that the best decision is to choose option number three. It would be foolish to start dumping money into additional construction of dealerships when the existing ones aren’t performing as expected already, and brand awareness is not a crippling issue. Furthermore, one of Saturn’s strengths is their image as a somewhat independent brand. If General Motors were to fully integrate Saturn’s operations into the core of GM itself, this identity would be lost.

The reality of the market today is that customers exist, so it is not necessary to dump any money into making people aware of Saturn’s products. Instead, Saturn needs to concentrate on attracting customers to their products, through newer vehicles and ideas. Saturn has consistently “missed the boat” on trends such as the SUV and the mid-size sedan, and when it finally did enter these markets, the results were always below what their executives had expected. This brings attention to the idea that instead of following in the footsteps of companies that are leading sales figures on new vehicles, Saturn needs to break through with some ideas of their own that will start trends with their vehicles.

Today’s market is full of many similar vehicles with similar features. Year’s ago, Saturn released the issue of GM’s first electric vehicle, but the market was not ready to accept. With the new environmental awareness crazes, a second look at this strategy could pay off, but it will have to be aptly timed and the vehicle must look acceptable enough to today’s drivers. Perhaps one of the greatest opportunities decision three would bring, along with the fact that GM has recently dissolved Oldsmobile, is Saturn now has a new niche to fill as a higher quality brand than competing imports. The potential for Saturn is extremely high if the right decisions are made and followed by appropriate actions.

While researching this case, I came across material that supports my decision as action Saturn should proceed with. Saturn is releasing two new heavy-horsepower vehicles that may show whether or not Saturn can thrive as a healthy product line. These vehicles, the Saturn Sky (a sporty two-seater roadster), and the Saturn Aura (a mid-size sedan), are scheduled to go on sale in 2006 (Appendix Article 1). Saturn is in the middle of a renovation that one executive has described as costing “a couple billion” in R&D for designs and adding as many as 80 dealerships to their force (Appendix Article 3). Whether or not this will be successful remains to be seen, but it is easily observed that people are working hard to put more Saturn vehicles to our roads.



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