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Integration of Green Marketing within the automotive industry

 

R. Lumina Julie

Asst Professor, Dept of Management

Sri Krishna Arts and Science College

Coimbatore

 

"The artist is nothing without the gift, but the gift is nothing without work."

 

INTRODUCTION

 

The US automotive industry, the largest automobile manufacturer in the world, witnessed the downward slide of the Big Three, viz., Ford Motor Company (Ford), General Motors Corporation (GM) and DaimlerChrysler (DC) in market share continuing unabated for the last 10 years. Toyota Motor Corporation (Toyota) seemed all set to become the market leader by the end of 2006 (Ulrich, 2006). In the light of rapidly rising healthcare costs and the heavy burden of legacy costs for retirees6 paid by the Big Three as part of the settlement with the United Auto Workers7, the Big Three was losing out to Japanese and European auto-makers. Many strategic interventions were initiated by the U.S automakers under the leadership of the Big Three to trigger market growth.

 

GM launched ‘Keep America Rolling’ campaign after the 9/11 attacks with more emphasis on high incentives and low to zero interest rate loans. Ford offered a free computer along with the purchase of Ford Focus vehicle. An entry level passenger car was offered along with a high end Sport Utility Vehicle (SUV)8. In 2004, the U.S automakers spent nearly US$ 60 billion in rebates and over 90% of the cars sold had some incentive. But Japanese players were also following suit. In 2004, Toyota’s incentives reached a level of US$ 3100 per vehicle. Overall 2006 marked the evolution of the New Six viz, Toyota, Honda, Nissan, GM, Ford and DC, replacing the Big Three (McLaughlin, 2006).Japan accounted for 16.7% of the world automobile production in 2004.

 

The modern era is normally defined as the 25 years preceding the current year. However, there are some technical and design aspects that differentiate modern cars from antiques. Without considering the future of the car, the modern era has been one of increasing standardisation, platform sharing, and computer-aided design.

 

Exemplary modern cars:

 

Ø      1966–present Toyota Corolla — a simple small Japanese saloon/sedan that has come to be the best-selling car of all time.

Ø      1973–present Mercedes-Benz S-Class — electronic Anti-lock Braking System, supplemental restraint airbags, seat belt pretensioners, and electronic traction control systems all made their debut on the S-Class. These features would later become standard throughout the car industry.

Ø      1998–present Ford Focus — one of the most popular hatchbacks across the globe, that is also one of Ford

's best selling world cars.

Ø       2008–present Tata Nano — The Tata Nano is an inexpensive(Indian Rupee ₹100,000 ~ $2200), rear-engined, four-passenger city car built by the Indian company Tata Motors and is aimed primarily at the Indian domestic market.

 

GENESIS OF THE AUTOMOBILE INDUSTRY

 

The genesis of the automobile industry dated back to 15th Century when the famous Italian genius, Leonardo da Vinci suggested the possibilities for power-driven vehicles. Later in 17th Century, the famous English physicist Sir Isaac Newton proposed the concept of a steam carriage which was brought to reality in the late 18th Century by French Army Captain Nicholas- Joseph Cugnot. During the mid 1800s, the attention had shifted to internal-combustion engines which were safer and easy to operate than the steam-driven engines. The first successful version of the internal-combustion engine was built by Jean-Joseph Etienne Lenoir in 185911. This model was revised by a German shop clerk, Nikolaus August Otto in 1876 and hence came to be known as the Otto engine.

 

The automobiles manufactured in the 1890s were called as ‘horseless carriages.’ This marked the beginning of craft production as all the manufacturing was done by craftsmen employed in metal and machine tool industries. Each car was tailor-made to suit the needs of wealthy customers.

 

MASS PRODUCTION VERSUS LEAN PRODUCTION IN AUTOMOBILE INDUSTRY

 

Lean Production is a system of work organization that strives to deliver high quality, low-cost products through the efficient use of resources and the elimination of waste.

 

Mass production                                                        Lean Production

 

Complete inter-changeability of standardized parts and the simplicity of attaching them to each other

More general resources e.g. multi-skilled workers and general purpose machines, for flexible production.

A standardized product design that enabled production in large batches to achieve economies of scale, coupled with large buffers of inventory stock to prevent any interruptions in production.

Small buffers and lot sizes to facilitate a market strategy of responding quickly to demand fluctuations with a greater variety of product designs.

A centralized hierarchy that controlled and coordinated specialized and narrowly defined tasks.

 

More decentralized authority with greater lateral communication across functional boundaries, team work, and operators’ participation in quality circles and continuous improvement activities

 

MARKET TRENDS INDUSTRY STRUCTURE

 

In the automobile industry, transaction cost economics, and technology shifts determined the structure (Sako, M). During the 1890s, craft production techniques led to the formation of horizontally disintegrated industry, completely devoid of consolidation. Manufacturing units evolved in regions boasting of skilled labor. By the middle of the 20th Century, automobile companies like Ford and GM brought about consolidation in the industry. The companies themselves were vertically integrated. The market was oligopolistic in nature. Huge production costs deterred new firms from entering the market. GM emerged as the market leader, wielding high influence over market prices. By 1920s, Ford perfected mass production techniques. The company also took initiatives for a high degree of vertical integration by owning its own steel milland forging factory. Other players followed suit to achieve substantial cost savings. The integration of Fisher Body by GM marked one such instance. But contrary to the trend for vertical integration by the US auto-makers, Japanese automakers practiced ‘relational contracting (Sako, M).’ The practice of ‘Just-In-Time’ delivery as part of the lean production techniques gave rise to a healthy relation between the assemblers and the suppliers of automobile components. By 1980s the industry showed renewed signs of vertical disintegration. Chrysler formed strategic tie-ups with suppliers for major components and in turn concentrated only in designing, assembling and marketing. These initiatives helped Chrysler to realize the highest average profit per vehicle amongst the Big Three. Ford and GM started depending on Visteon and Delphi, respectively, for sourcing their components. All the components of a car were outsourced to suppliers who offered lowest prices .This increased the manufacturing capacity of the auto-makers and the industry was soon saddled with overcapacity. In 1999, the global automobile Industry had an excess capacity of 20 million units.

 

PRODUCTION SCENARIO

 

The global automobile industry, witnessing robust growth in the face of increased global demand, produced around 63 million motor vehicles in 2004. The Asian countries, mainly by Japan, China and India, registered a 9% increase in production over last year, constituting 35.9% of the global production. In fact China and India posted positive growth rate over 2003. With the opening up of EU markets, the share of EU countries in global automobile production was expected to increase in the coming years.

 

In the European sector, Germany’s domestic production stood at 5.6 million vehicles and another 4.8 million vehicles of German brands were manufactured abroad in 2004 (Table 4). With the new wave of globalization, VDA members employed nearly 1.5 million people in their international operations. This trend was in tune with the growing recognition of low priced production sites in abroad locations.

 

PRODUCT OFFERINGS

 

With increasing consumer awareness about the negative impact of automobile emissions, auto-manufacturers were readily going for technological improvements, thereby launching new products. These innovations were broadly classified under engine modifications and improved transmissions. Engine modifications were aimed at reduction of pumping losses, reduction in engine friction and improved combustion and some examples included:

 

Ø      Variable Valve Timing (VVT) or Variable Valve Lift and Timing (VVLT) – This was the generic term used for an automobile piston engine technology. The first functional system was developed by Fiat. Honda developed the Variable valve Timing and lift Electronic Control to improve the efficiency of internal combustion engines. Basically this innovation provided for a better fuel/air mix and improved combustion thereby reducing CO2emissions.

Ø      Cylinder Deactivation or Displacement on Demand – This technology, generally applicable for larger vehicles with V-6 and V-8 engines, provided for shutting down of one or more cylinders when the extra power was not needed

Ø      Engine downsizing combined with turbocharger or supercharger – This technology aimed at minimizing the loss of energy power thereby reducing CO2 emissions.

 

MEASURE OF THE GREEN MARKETING IMPLICATION

 

These five categories will precisely measure the green marketing implication of all the companies studied.

 

OPPOSITION: In this category the leaders and managers reject the idea of the existence of any kind of environmental concerns. They do not think that there is a real problem for the society by polluting or adopting a bad behaviour for the environment. They can be so hostile with this idea that sometimes they can show a certain animosity for people defending and claiming environmental problems. The company of course deny all responsibilities for the environmental concerns. This behaviour is easy to detect since for instance no research will be done to produce less pollutant products whatever the mean.

 

PROTECTION: In this category we can notice that the company is more concerned about the environmental problems and the sustainable development but not in a positive way. Indeed, the protectionists see the sustainable development as a threat for the company and thus adopt a defensive behaviour to fight it. These companies can be recognized by performing actions such as lobbying to oppose or to slow down new laws favouring the reduction of the pollution by giving to the companies more responsibilities for the protection of the environment.

 

SOCIALISATION: The socialisation is categorized by a company which recognizes social, environmental, ethical problems. However, the company prefers to let it outside its activity. At least we34can notice a first implication of the company appearing as a volunteer contribution for the general interest in order to get the image of a “good citizen”. These actions can be for example the participation in the local life or any cultural or humanitarian activities.

 

COOPERATION: The managers consider the sustainable development issues as a professional concern and accept at least the idea of a social and environmental responsibility. However, they adopt at the same time a position of negotiation and a share of responsibilities with other actors like the state or the territorial collectivities. They also claim for them to take charge of at least a part of the costs of these adaptations to wider responsibilities.

 

INTEGRATION: The sustainable development issues are broached as stakes characterizing the state of a society and the structure of the markets. It means a particular effort from the company in planning the strategy and the adaptation of methods and processes. The performance in concern of the sustainable development appears like a challenge; challenge which is indispensable to satisfy the necessities of a new consumer more concerned by this environmental issue. This strategy of integration is also important for the company in order to maintain its competition in the future.

 

FORD WINS AUTOMOTIVE GREEN MARKETER OF THE YEAR AWARD

 

Ford won the Nielsen Company’s first Automotive Green Marketer of the Year award at the Los Angeles International Auto Show.

 

Nielsen picked Ford as the award’s first ever winner for three reasons:

 

  • Ford’s marketing campaigns for the Fiesta and Fusion Hybrid.
  • Ford’s official sponsorship of American Idol, which gave it a forum to “put specific emphasis on the hybrid offerings,” as the press release states, and increased viewers’ awareness of its “green message among millions of people every week.” During the past season of American Idol, the Ford Music Video Challenge featured the Fusion Hybrid and Escape Hybrid.
  • Ford’s use of social media, including launching new apps, helped the company “reach a new class of prospective car-buyers.”

 

CONCLUSION

 

The development of economy is the contradiction between ease the resource constraints fundamental way, and also the transformation of economic growth, an important way to achieve sustainable development. This is also with the automotive industry has been the focus coincides with the implementation of green marketing, therefore, in the mode of circular economy under the integrated  green marketing requires the majority of entrepreneurs, recognition and action, advocate green living, green demand is also need to lead the government, society to jointly promote and market, business, government, society, public interaction to build a resource-saving and environment-friendly society is very important.

 

REFERENCES

 

Ø      Shen Genrong. Green Marketing Management .Fudan University Press, 1998(in Chinese). He Quan. Establishing Green Marketing Strategy of Basing Circular Economy. Journal of the Postgraduate of Zhongnan University of Economics and Law 2006, (4):108-111.

Ø      “Toyota Production System terms,” Retrieved May 21, 2006, from May 21, 2006,

Ø      http://www.toyotageorgetown.com/terms.asp.22. Ulrich, L (2006).

Ø      Prakash, A. (2002), “Green marketing, public policy and managerial strategies”, Business Strategy and the Environment, Vol. 11, pp. 285-297.

Ø      Queensland Government (2006), “Green Marketing: The competitive advantage of sustainability”, Queensland Government Environmental Protection Agency, March 2006.