Geely Holding
 Group
 Marketing Essay

Markets,
Marketing
and
Strategy
Essay
 
 
 
 
 
 
 
 
 
 
 
 
 
 Strategy

This
essay
will
attempt
to
identify,
analyze
and
discuss
the
strategic
issues
in
 Geely
Holding
Group
using
industry
structure
and
dynamics.
There
are
five
 competitive
forces
that
shape
the
strategy
of
a
company,
threat
of
new
entrants,
 bargaining
power
of
supplier,
bargaining
power
of
buyers,
threat
of
substitute
 and
rivalry
among
current
competitors.
However,
as
covering
all
five
forces
will
 be
beyond
the
scoop
of
this
essay,
it
will
be
focusing
on
threat
of
new
entrants
 and
rivalry.

 Even
though
Geely
Holding
Group
exports
cars
on
top
of
selling
in
its
local
 market,
its
main
market
is
the
China’s
automobile
industry1.
With
China’s
 automobile
market
growing
rapidly
in
the
last
few
years,
it
has
become
one
of
 the
biggest
automobile
markets
in
the
world,
this
mean
that
the
existing
firms
in
 the
industry
will
have
to
be
aware
of
new
entrants
into
the
industry.
Gerenally,
 barriers
are
high
in
an
automobile
industry,
and
there
are
several
main
factors
 contributing
to
this.
One
of
the
factors
is
supply‐side
economics
of
scale.
When
 firms
have
high
output,
it
allows
them
to
cut
cost
in
production
by
buying
in
bulk
 and
because
they
have
huge
buying
power,
supplier
will
not
want
to
lose
them
as
 customers
and
give
them
better
deals.
They
will
also
be
able
to
spread
cost
over
 more
units
for
their
marketing,
research,
services
and
distribution.
This
means
 that
new
entrant
will
have
a
much
higher
cost
of
production
unless
they
are
able
 to
come
in
on
a
large
scale.
With
1.2
million
Geely
cars
on
the
road
globally2,
this
 is
certainly
an
advantage
that
Geely
has
over
smaller
new
entrants.

 Established
firms
also
enjoy
demand‐side
benefits
of
scale.
When
more
people
 use
the
product,
it
will
assure
people
that
the
product
is
trustable,
causing
even
 more
people
to
be
willing
to
pay
for
the
product.
With
products
like
automobiles,
 quality
is
important.
Incumbents
have
the
advantage
of
having
experience,
 acquiring
technology
and
building
customer
loyalty
over
the
years
thus,
unlike
 entrants,
they
do
not
have
to
spend
as
much
on
marketing
and
advertising
to
 prove
that
they
are
trustable.
In
2010,
Geely’s
sales
surpassed
target
by
15,000
 units3.
It
sales
will
be
a
testimony
of
its
reliability
to
new
customers
who
would
 be
more
willing
to
buy
from
a
company
that
is
doing
well
than
to
take
a
risk
with
 a
newcomer.
All
these
will
discourage
entry,
as
entrants
will
have
to
keep
their
 prices
much
lower
to
compete
for
customers.
 To
enter
the
automobile
industry,
there
is
a
high
capital
requirement.
The
high
 level
of
investment
sometimes
will
keep
entrants
out
because
it
means
that
risk
 is
high.
Entrants
will
need
not
only
to
invest
in
fixed
facilities,
they
will
need
to
 invest
in
advertising
and
research,
which
are
mostly
unrecoverable
cost,
if
they
 
























































1
Geely
Automobile
Holdings
Limited
Annual
Report
2009
[ONLINE].
Available
 2
Geely
Holding
Group
[ONLINE].
Avilable
from:


from:

http://hmdatalink.com/PDF/C00530/e00175(116).pdf

 http://www.geely.com/english/1‐6.html



3
Geely
Auto
sales
surpass
2010
target.
(January,
2011)
[ONLINE].
Avaliable


from:
http://autonews.gasgoo.com/china‐news/geely‐auto‐sales‐surpass‐2010‐ target‐110112.shtml



want
to
get
to
where
the
incumbents
are,
without
the
guarantee
that
they
will
be
 successful.

 For
established
firms
like
Geely,
one
of
the
best
strategy
will
just
be
to
keep
the
 entrants
out
to
defend
their
market
share.
They
posses
enough
resources
to
fight
 back,
they
have
technology,
borrowing
power
and
facilities
at
their
disposal.
As
 they
are
large
firms
who
enjoy
economics
of
scale
and
their
production
cost
is
 usually
low,
they
also
have
the
ability
to
cut
prices
in
order
to
retain
their
market
 share
without
making
a
loss.
 High
rivalry
among
competitors
limits
the
profitability
of
an
industry.4
The
 rivalry
in
the
automobile
industry
in
China
is
intense.
One
of
the
factors
the
 attributes
to
this
is
that
there
are
numerous
competitors.

Even
though
Geely
is
 an
established
and
relatively
large
firm,
there
are
many
other
local
and
foreign
 automobile
firms
that
are
just
as
powerful,
if
not
more
powerful,
and
could
 mirror
its
cars’
quality
and
price
promotions.
 Due
to
high
investment
nature
of
the
automobile
business,
exit
barriers
in
the
 industry
are
high.
This
mean
that
even
if
they
firms
were
not
making
much
profit
 or
sometimes
even
making
a
loss,
they
will
stick
around
in
the
business
and
try
 to
cut
prices
to
retain
their
market
share,
this
will
affect
the
whole
industry
as
it
 is
a
price
competitive
industry.
The
market
that
Geely
is
focusing
on
is
mainly
 middle
class
sedans
and
these
cars,
unlike
luxury
cars,
are
price
sensitive.
Thus
 when
one
firm
cuts
its
prices
below
the
normal
market
price,
its
competitors
will
 start
to
do
the
same
to
stay
competitive.

 The
low
switching
cost
of
cars
for
customers
from
one
brand
to
another
is
 another
factor
that
adds
to
the
rivalry.
When
switching
cost
is
low,
customers
are
 more
price
sensitive
and
are
more
likely
switch
to
the
product
that
is
cheaper
as
 there
will
be
no
barriers
stopping
them.
Moreover,
most
of
the
middle‐class
 sedans
are
nearly
identical
with
hardly
much
difference
in
the
features
of
the
car
 except
for
the
design
of
the
cars.
This
characteristic
of
the
industry
means
that
 firms
often
cut
cost
to
win
customers
starting
price
wars.
 The
essence
of
strategy
is
choosing
to
perform
activities
differently
than
rivals
 do(Porter
1996).
To
have
a
sustainable
strategy,
Geely
should
try
to
take
a
 different
approach
from
it’s
rivals
rather
than
do
what
every
other
firm
selling
 affordable
cars
are
doing.
It
has
been
reported
that
Geely
has
tried
to
collaborate
 with
China
Unicom
to
develop
the
new
generation
of
3G
"intelligent
vehicles"5.
 This
could
be
something
different
that
it
is
doing
to
stand
out.
Allowing
its
 product
to
differentiate
from
other
products
is
essential
in
a
highly
competitive
 
























































4
Porter,
M.
E.
(2008).
The
Five
Competitive
Forces
That
Shape
Strategy.
Harvard


Business
Review.
[ONLINE]
Available
at:
 http://www.mktgsensei.com/AMAE/Strategy/HBR%20on%20Strategy.pdf#pag e=25

 5
China
Knowledge.
(2010).
China
Unicom,
Geely
join
hands
on
3G
intelligent
 vehicles.
[ONLINE]
Available
at:
 http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&cat=R ND&NewsID=%2039715



market.
The
only
way
a
company
can
do
better
than
its
rivals
is
if
it
can
find
a
 sustainable
difference
that
could
appeal
to
customers.
 
 
 References:

 China
Knowledge.
(2010).
China
Unicom,
Geely
join
hands
on
3G
intelligent
 vehicles.
[ONLINE]
Available
at:
 http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&cat=R ND&NewsID=%2039715

 
 Geely
Automobile
Holdings
Limited
Annual
Report
2009
[ONLINE].
Available
 from:

http://hmdatalink.com/PDF/C00530/e00175(116).pdf
 
 Geely
Auto
sales
surpass
2010
target.
(January,
2011)
[ONLINE].
Avaliable
from:
 http://autonews.gasgoo.com/china‐news/geely‐auto‐sales‐surpass‐2010‐target‐ 110112.shtml

 
 Geely
Holding
Group
[ONLINE].
Avilable
from:
 http://www.geely.com/english/1‐6.html

 
 Porter,
M.
E.
(2008).
The
Five
Competitive
Forces
That
Shape
Strategy.
Harvard
 Business
Review.
[ONLINE]
Available
at:
 http://www.mktgsensei.com/AMAE/Strategy/HBR%20on%20Strategy.pdf#pag e=25

 
 Poter,
M.
E.
(1996).
What
is
Strategy?.
Harvard
Business
Review.
[ONLINE]
 Available
at:
 http://www.ipocongress.ru/download/guide/article/what_is_strategy.pdf

 
 
 
 
 
 
 
 


Marketing
 This
essay
will
attempt
to
analyze
Geely
Automobile’s
marketing
by
using
 segmentation
and
comparing
it
to
its
competitor,
BMW
China.
Market
 Segmentation
is
the
process
of
dividing
a
total
market
into
groups,
or
segments,
 consisting
of
people
or
organizations
with
relatively
similar
product
needs.6
The
 automobile
industry
in
China
has
all
the
five
conditions
that
are
needed
for
 segmentation
to
succeed.

The
market
is
heterogeneous
because
different
people
 look
for
different
things
in
a
car.
While
some
are
content
as
long
as
their
car
is
 efficient,
some
look
to
their
car
as
a
status
symbol.

Due
to
the
heterogeneous
 natural
of
the
market,
most
automobile
firms
tend
to
focus
on
a
certain
segment.
 This
allows
the
firms
to
meet
the
needs
of
its
target
customer
more
precisely.

 Two
of
the
very
distinct
market
segments
for
the
China
automobile
industry
will
 be
those
that
want
low‐cost
cars
and
those
that
want
luxury
cars.
These
can
be
 further
broken
down
into
more
segments
however,
most
of
the
automobile
firms
 will
end
up
in
one
or
the
other,
taking
on
a
concentrated
targeting
strategy,
with
 a
few
firms
taking
on
the
differentiated
targeting
strategy
and
taking
on
both
the
 segments.

 Geely
Automobile
strives
to
produce
cars
that
are
high
quality
yet
low
cost.
Its

 affordable
vehicles
are
mostly
targeted
at
middle‐class
buyers.
Geely
went
with
 demographic
variables.
It
looked
at
income
and
social
class
and
recognized
that
 there
is
a
huge
emerging
middle‐class
consumers
in
China’s
less‐developed
 hinterland
whose
annual
income
is
climbing
above
50.000
yuan,
which
is
the
 threshold
for
car
ownership
in
China
as
believed
by
executives.7
These
group
of
 people
forms
its
market
segment.
BMW
China,
on
the
other
hand,
pride
 themselves
on
producing
stylish,
elegant
and
luxurious
cars
that
are
associated
 with
class
and
money.
Its
market
segment
is
the
upper
and
upper‐middle‐class

 segment
of
China’s
population,
people
who
mostly
live
in
the
cities
and
have
 became
very
wealthy
since
China
opened
its
doors.
Both
employ
the
 concentrated
targeting
strategy
and
specialized
in
providing
for
its
target
market
 segment,
allowing
it
to
be
focus
on
satisfying
that
group’s
needs.
 However,
before
Geely
and
BMW
had
arrived
at
their
market
segment,
they
went
 through
the
process
of
selection
the
specific
target
markets
that
are
the
most
 suitable
for
them.
When
deciding
which
segment
to
participate,
long‐term
profit
 opportunities
must
be
considered
by
looking
at
sales
estimates,
competitors
and
 cost
estimate.
Sales
were
good
in
both
market
segments
in
China
for
the
past
few
 years.
However,
when
it
came
to
competitors,
Geely
was
a
new
company
and
it
 was
not
ready
to
compete
with
firms
in
the
luxury
segment
such
as
Mercedes‐ Benz
and
it
would
be
better
to
be
competing
with
other
local
manufacturers
and
 perhaps
the
Japanese
and
the
Korean
manufactures
in
the
low
cost
cars
segment.
 
























































6
Pride,
W.
A.
and
Ferrell,
O.
C.
(2008).
Marketing
Concepts
and
Strategies.


Expanded
2008
Edition.
United
States
of
America:
Houghton
Mifflin
Company
 [ONLINE].
Available
at:
 http://online.wsj.com/article/SB100014240527487046109045760312930467 66076.html



7Shirouzu,
N.
(2010).
In
China,
Making
Cars
on
a
Budget..
The
Wall
Street
Journal.


Its
competitor,
BMW,
however,
had
been
around
for
a
long
time
is
able
to
go
face
 to
face
with
other
luxury
car
brands
and
match
them
in
technology
and
style.

 Cost
wise,
BMW
was
already
an
established
car
manufacturer
thus
the
cost
of
 entering
the
luxury
market
would
not
have
been
that
high
as
it’s
brand
image
 and
trust
worthiness
had
already
been
established.
Geely,
however,
was
a
new
 entrant
into
the
industry
just
a
few
years
ago
and
it
would
cost
a
lot
for
it
to
be
 able
to
build
its
reputation
to
that
to
BMW
in
a
very
short
time,
thus
it
was
be
 better
for
it
to
go
into
the
low
cost
cars
market
where
it
can
compete
with
other
 relatively
new
car
manufacturers
as
well.

 BMW
also
had
the
financial
resources,
managerial
skills,
employee
expertise,
and
 the
facilities
to
enter
China’s
luxury
cars
market
as
it
was
already
an
established
 car
manufacturer.
Geely,
however,
did
not
have
the
fortune
of
having
all
of
those
 strong
enough
to
compete
in
the
luxury
market
as
it
was
just
starting
to
venture
 into
the
industry
when
it
entered
the
market.
For
BMW,
luxury
car
market
 segment
was
appropriate
and
we
see
how
that
it
is
blooming
in
the
market
with
 sales
of
BMW
coming
to
a
record
of
90536
units
in
20098.
Geely’s
marketing
 approach
of
selling
affordable
efficient
cars
have
also
so
far
been
working
in
its
 favor,
in
2010,
its
sales
surpass
target9
and
Geely
annual
report
shows
that
its
 profit
from
the
year
from
2005
to
2009
has
increased
steadily.10

 BMW
has
managed
to
position
itself
in
the
China
automobile
as
a
high‐end
 luxurious
car
brand
that
people
have
came
to
associate
with
a
symbol
of
status.
It
 does
this
by
consistently
delivering
high
performance
cars
that
are
reliable
yet
 stylist
and
luxurious.
Geely
Automobile,
on
the
other
hand,
has
to
position
itself
 in
the
China
automobile
as
a
trust
worthy
car
that
is
low
cost
and
efficient.
Geely
 have
invested
a
lot
of
money
into
its
Geely
Automobile
research
institute11
and
 have
won
awards
for
being
innovative
and
reliable.
However,
it
kept
its
 marketing
strategy
and
still
keep
the
prices
of
its
cars
affordable
and
had
made
a
 name
for
itself
in
the
Chinese
automobile
market
in
just
a
few
years.
 As
Geely
automobile
become
one
of
the
biggest
automobile
firms
in
the
China
 market,
it
might
eventually
try
differentiated
targeting
strategy
and
develop
a
 market
mix
for
both
the
luxury
segment
and
low‐cost
segment.
Its
acquisition
of
 Volvo
is
a
step
in
the
direction
of
luxury
cars.
Now
that
Geely
has
established
 itself
in
the
market,
it
could
reposition
its
image,
however,
there
are
high
risks
in
 
























































8
Andrew,
C.
(2010).
BMW
sales
in
China
came
to
a
record
of
90536
in
2009.


4WheelsNews.
[ONLINE].
Available
from:
http://www.4wheelsnews.com/bmw‐ sales‐in‐china‐came‐to‐a‐record‐90536‐units‐in‐2009/

 9
Geely
Auto
sales
surpass
2010
target.
(January,
2011)
[ONLINE].
Avaliable
 from:
http://autonews.gasgoo.com/china‐news/geely‐auto‐sales‐surpass‐2010‐ target‐110112.shtml

 
 10
Geely
Automobile
Holdings
Limited
Annual
Report
2009
[ONLINE].
Available
 from:

http://hmdatalink.com/PDF/C00530/e00175(116).pdf

 
 11
Geely
Holding
Group
[ONLINE].
Avilable
from:
 http://www.geely.com/english/1‐6.html


doing
so.
Even
though
it
is
doing
so
well
now,
it
might
just
be
due
to
the
fact
that
 it
is
in
the
right
market
segment
and
if
it
try
to
reposition
itself
and
to
change
its
 target
markets,
it
might
end
up
not
doing
as
well
as
now.
 
 

 References:
 Andrew,
C.
(2010).
BMW
sales
in
China
came
to
a
record
of
90536
in
2009.
 4WheelsNews.
[ONLINE].
Available
from:
http://www.4wheelsnews.com/bmw‐ sales‐in‐china‐came‐to‐a‐record‐90536‐units‐in‐2009/

 
 Geely
Automobile
Holdings
Limited
Annual
Report
2009
[ONLINE].
Available
 from:

http://hmdatalink.com/PDF/C00530/e00175(116).pdf

 
 Geely
Auto
sales
surpass
2010
target.
(January,
2011)
[ONLINE].
Avaliable
from:
 http://autonews.gasgoo.com/china‐news/geely‐auto‐sales‐surpass‐2010‐target‐ 110112.shtml

 
 
 Geely
Holding
Group
[ONLINE].
Avilable
from:
 http://www.geely.com/english/1‐6.html
 
 Pride,
W.
A.
and
Ferrell,
O.
C.
(2008).
Marketing
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