Saturn Case Analysis

Case: _____Saturn_____

Case Abstract Form

_____ Problem Statement:

Saturn's sales are down, and market share needs to be increased. Also, the product line is too narrow. Current advertising is targeting the younger population, but the average age of a Saturn buyer is 43. Saturn's initial focus on employee relationships seems to be fading as demonstrated with the clash between GM designers in Europe and the U.S. on the L-Series car. In addition, overall styling of the vehicles needs to be addressed.

_____ Key drivers of change in the industry (e.g., driving forces):

The trend in vehicles has moved towards larger sedans and SUV's, and the ones who are purchasing smaller vehicles are looking for cars more sporty than the models Saturn offers.

_____ Competitor Strength Assessment (Competitor strengths & weaknesses,

primary strategies of each competitor (e.g. low cost leader, focused differentiation, prospector, reactor, etc.), Porter's 5-forces assessment):

Hyundai- cost leadership strategy, breadth of product line is low

Kia- cost leadership strategy, breadth of product line is low

Ferrari- differentiation strategy, very high price, breadth of product line is low.

Lamborghini- differentiation strategy, very high price, breadth of product line is low

Porsche- differentiation strategy, high price, breadth of product line is low.

Mercedes- differentiation strategy, high price, breadth of product line is moderate

BMW- differentiation strategy, high price, breadth of product line is moderate, known for their cars being in the shop constantly and high maintenance bills.

Toyota- focused differentiation, medium pricing, breadth of product line is low. Company is known for quality products, and nice styling.

Ford- focused differentiation, medium pricing, breadth of product line is high. A strength is their pick-up truck market share, a weakness is perceived reliability and styling on some of the lines.

GM- focused differentiation, medium pricing, breadth of product line is high. A strength is market share, and a weakness is styling and reliability and perceived quality.

Honda- focused differentiation, medium pricing, breadth of product line is high. Strengths are quality, reliability, overall value, and styling.

Nissan- focused differentiation, medium pricing, breadth of product line is high. A strength is styling, and a weakness is some Americans simply will not buy any car that is not American made; obviously this weakness applies to all imports, but is only listed once.

Porter's Five Forces:

1. Intensity of rivalry among competitors- there is intense rivalry among the automobile industry. There is only a handful of companies in the world, and it is war to survive.

2. Threat of new entrants- the threat of new entrants is low because the handful of car companies that exist today are giants, and it would take a ridiculous amount of money to enter the industry. Not to mention the economies of scale that the existing companies would enjoy over you.

3. Threat of substitutes- this is moderate because there are a limited number of competitors, but at the same time, there are many different product lines to choose from. There is also public transportation, which is growing, as seen locally with the light rail.

4. Bargaining power of customers- this is minimal because of the tight margins in the industry as a whole. Saturn allows its customers zero bargaining power with their pricing policy because they simply will not sell their cars a penny under sticker.

5. Bargaining power of suppliers- the suppliers to an automobile manufacturer like GM is not going to have a lot of bargaining power because of the huge orders that GM is going to be placing. For example, if GM is negotiating with Sonny for speakers in their cars, and they are not happy with what Sonny is doing, they can simply switch to Pioneer, or one of the other many speaker manufacturers.

Key Factors for Competitive Success in the Industry (e.g., What does it take

to be successful in this industry?)

To be successful in this industry you must have a carefully selected target market, and a thorough understanding of their needs and wants. Unless you are using a highly differentiated strategy, such as Lamborghini, you will need a broad product line to ensure you stay on top of the ever-changing trends. To enter the industry would require an outrageous amount of money, and would still be very difficult to survive against the giants in the industry. The only way to survive would be to begin by being a leader in a certain niche. For example, there is not a company that has really strong position as the "electric car" or some other alternative fuel vehicle. A new company with vast amounts of financial resources (or a current manufacturer could launch a new brand) to take this position by specializing in this market.

_____ Recommended Strategy and Justification (Use strategies from the text and

class discussion.)

The first thing they should do is begin targeting the middle 40 year olds because this is primarily who is buying their products. They will also need to align their advertising campaign with the new target market, and select the proper mediums to reach the market. Saturn had originally chosen the younger market because