Exporting Chevrolet Volt to Germany
November 18, 2014
International Marketing
Illinois State University
Professor Kaufman
Samantha Heath
Kevin Hancock
Mark Nechi
Casey Zidek
Andrew Lipovsky
Table of Contents
TABLE OF CONTENTS ...............................................................................................................................................................2
EXECUTIVE SUMMARY .............................................................................................................................................................3
COMPANY OVERVIEW ..............................................................................................................................................................4
INDUSTRY / CATEGORY ..........................................................................................................................................................4
GLOBAL ............................................................................................................................................................................................................. 4
NATIONAL ........................................................................................................................................................................................................ 5
CULTURAL ANALYSIS ...............................................................................................................................................................6
GEOGRAPHICAL SETTING ............................................................................................................................................................................... 6
RELEVANT HISTORY........................................................................................................................................................................................ 6
POPULATION:................................................................................................................................................................................................... 6
RELIGION .......................................................................................................................................................................................................... 8
LIVING CONDITIONS ........................................................................................................................................................................................ 8
BUSINESS CUSTOMS/ETIQUETTE.................................................................................................................................................................. 8
CULTURAL DESCRIPTORS ............................................................................................................................................................................... 9
POLITICAL/LEGAL ANALYSIS ............................................................................................................................................. 10
CURRENT RELATIONS WITH THE U.S. ........................................................................................................................................................10
POLITICAL RISK ASSESSMENT ....................................................................................................................................................................10
ECONOMIC ANALYSIS ............................................................................................................................................................ 13
ECONOMIC STATISTICS & ACTIVITY ..........................................................................................................................................................13
NATURAL RESOURCES..................................................................................................................................................................................14
TRANSPORTATION INFRASTRUCTURE .......................................................................................................................................................14
COMMUNICATION INFRASTRUCTURE .........................................................................................................................................................14
LABOR FORCE ................................................................................................................................................................................................14
WORKING CONDITIONS................................................................................................................................................................................15
PRINCIPAL INDUSTRIES................................................................................................................................................................................15
TRADE POLICY ISSUES ..................................................................................................................................................... 15
EUROPEAN UNION ........................................................................................................................................................................................15
THE WORLD TRADE ORGANIZATION ........................................................................................................................................................16
HARMONIZED SYSTEM CODES ....................................................................................................................................................................16
TRADE BARRIERS..........................................................................................................................................................................................16
A POSSIBLE CIRCUMVENT ...........................................................................................................................................................................17
US AND GERMAN TRADE .............................................................................................................................................................................17
SUPPORTING US AGENCIES .........................................................................................................................................................................17
FINANCIAL ANALYSIS ............................................................................................................................................................ 18
COMPETITIVE ENVIRONMENT ........................................................................................................................................... 21
MARKET SHARES/COMPETITORS ..............................................................................................................................................................21
BMW ........................................................................................................................................................................................................ 22
Volkswagen ........................................................................................................................................................................................... 22
Smart ....................................................................................................................................................................................................... 23
MARKETING MIX ANALYSIS ................................................................................................................................................ 24
PRODUCT ........................................................................................................................................................................................................24
DISTRIBUTION ...............................................................................................................................................................................................26
PRICE ..............................................................................................................................................................................................................28
PROMOTION ...................................................................................................................................................................................................29
CONCLUSION ............................................................................................................................................................................. 30
REFERENCES ............................................................................................................................................................................. 31
2
Executive Summary
Chevrolet is a world renowned brand that was founded in the early 1900s, and
headquartered in Detroit, Michigan. As an American brand, citizens of the United States have
trusted Chevy vehicles since the time in which they were first manufactured and distributed in
the United States. Since the early introduction of these automobiles, Chevrolet has expanded into
multiple other regions throughout the world, such as Europe, Asia, Africa, and the Middle East.
With concerns for the environment on the rise, and an increasing market for fuel-efficient
vehicles, Chevy introduced the Volt in 2010, allowing consumers to decrease their fuel use and
reduce their carbon footprint.
Being the home to over 8.1 million people, Germany is the most populous country in
Europe. Outside of the European Union, Germany has consistently held the highest gross
domestic product in Europe, and has earned its place as the fifth largest economy in the world.
With that being said, Germany is an economic powerhouse that holds strong trade relations with
various countries all over the world. Among other things, Germany is a leading exporter in
machinery, vehicles, and chemicals. Throughout history, Germans have been consistently
recognized in the automobile industry for their ability to create high quality automobiles, and
developing well-known brands such as BMW and Audi. Although vehicle sales in Germany
were on a slight decline in 2013, there is an expected increase in automobile sales this year.
While there are no quotas in Germany in regards to the automotive market, there is an
import turnover tax of 19%, and all parts much meet regulations. There are many concerns and
regulations in regards to vehicle batteries, and all batteries must meet many regulations. Last
year, the United States exported over 5 billion dollars into Germany’s automotive industry alone.
Germany’s currency is the Euro, which is also used in various other regions around the
world, primarily Europe. The Euro is seen throughout the world as a strong, promising currency
with great value. One Euro is currently the equivalent to approximately $1.25.
With Germany being the home of the largest automobile markets in the world, there is a
large amount of competition in the market. German car manufacturers and distributers are
constantly working to gain market share. Although the Chevrolet Volt is the best-selling electric
vehicle in the United States, it hasn’t seen such success in Europe, or Germany in particular.
German’s tend to have a widespread belief that German-designed vehicles are far superior to any
American made product. With that being said, the Chevy Volt is not even a top-ten seller in
Germany in the electric car market. Competitors such as BMW, Volkswagen, and Smart have
created their own electric vehicles, and have established a substantial amount of market share in
Germany. The BMW i3 was specifically designed to sit in the same product class as the
Chevrolet Volt. The i3 is capable of traveling up to 80 miles on a single charge, while the Volt is
only capable of up to 40. The Volkswagen E-up is capable of traveling even higher distances, up
to 99 miles.
The target market for the Chevrolet Volt is primarily middle-class families, with a shared
concern for the environment. The age range tends to be individuals between the ages of 25 and
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60. Early adopters of technology are also targeted by Chevrolet. Trade journals are a primary
means of advertising for this vehicle.
While there is certainly room to enter into the automotive industry in Germany, there are
many factors that could delay the success of an electric vehicle such as the Chevy Volt.
Company Overview
The brand Chevrolet is made by the company General Motors which was founded in
1908 and headquartered in Detroit, Michigan. Chevrolet vehicles are offered in a large amount of
countries in North, Central, and South America, as well as Europe, Asia, The Middle East, and
Africa. Chevrolet offers a vast line of car types including: compact cars, electric cars, midsize
sedans, full size sedans, intermediate SUVs, standard SUVs, full size SUVs, as well as vans and
pickup trucks, totaling 19 different models. According to GM’s 2013 financial statements they
generated a net income of $3.7 billion.
The Chevrolet Volt was developed in the mid-2000s with a couple of key points in mind,
first to surpass the Prius by using the Volt to reclaim market share with superior technology.
Second was the idea of breaking into the electric transportation segment and gaining comparative
advantage. The third goal was to comply with the ever increasing pressure to find alternative
sources of transportation that were sustainable and without the use of crude oil.
The Chevrolet Volt was launched in December of 2010. The target market when the
product was launched were big cities, specifically New York, Las Angeles, and Washington DC.
The Volt is a very unique car because it offers the driver the ability to travel up to 40 miles
without using any petroleum fuel at all. This was done by an EV charge which could be
recharged at different charging stations which are located publicly, or from the use of a home
unit.
Industry / Category
The automobile industry plays an important role in our global economy. Motor vehicle
trade has strengthened the economic relationships of many different countries. North America,
Asia, and Europe have historically been the largest manufacturers of motor vehicles, and
Germany is undoubtedly the largest player in
Europe. Germany has typically been known
for its high quality engineering, and
developing well-known brands such as Audi,
BMW, and Mercedes-Benz.
Global
Size / Growth
The automobile industry is one of the
largest sectors in the global economy. By
2015, the industry’s yearly growth rate is on
track to grow by 5.5%, reaching a value of
over 5.1 trillion dollars. The number of cars
4
sold worldwide in 2013 was roughly 72.23 million (4).The global automobile market is divided
into six segments: three mature markets, and three new markets from emerging economies.
Currently the automobile industry leader is the United States with Japan and Germany following
close behind, while Eastern Europe, the Pacific Rim, and Latin America have been developing a
secondary consumer market. Shown on the right, passenger car sales have increased 8.9% in the
United States in 2013, while the sales of passenger cars in Europe have declined by 1.9%. The
top six companies accounting for more than half of global sales are General Motors, Toyota,
Ford, Chrysler, Volkswagen, and Honda (1). According to the Global Industry Overview, the
global automotive industry is predicted to experience a fair amount of growth in 2014, after
many markets struggled in 2013 (3).
Trends
Due to the growing worldwide environmental movement, there has been a shift in
research and development for automobile manufacturers to building electric and hybrid vehicles.
In fact, electric car sales increased by over 228% in 2013. Some growing trends in the
automotive industries include implementing many new factors into new automobiles. For
example, many cars are being manufactured with new composite materials. There has also been
an increased emphasis on computer-aided design. Safety has been increasingly important in the
manufacturing of vehicles. Many electronic-based cars, such as the Chevy Volt, have been
building their vehicles with advanced batteries to allow longer battery life and recharging (1).
National
Size / Growth
Germany is known worldwide to be a leading player in the automotive industry. Over
800,000 people in Germany are directly employed in the automotive industry (3). Although the
German auto market remains stable, in 2013 automobile sales in Germany respectively declined
4% in the passenger car segment, and 2.2% in the commercial vehicle segment. Although sales
have declined, Germany’s automobile industry is expected to see in increase in 2014, with total
vehicle sales forecasted to increase 1% over the year (3). The European market currently remains
in decline, but Germany remains Europe’s largest car market with sales of 3.1 million units in
2012 (1). On top of that, German car manufacturer Volkswagen was still the world’s leading car
manufacturer in 2013, producing over 920,000 cars, and bringing in a revenue of over 270 billion
dollars (4). Sales in the German car market in the first nine months of 2013 dropped 6%, leaving
total sales at 2.2 million vehicles. With that being said, production in Germany remained
relatively steady at almost 4.1 million vehicles. The reason for these numbers is the fact that
Germany exports roughly 75% of the vehicles they produce (1). According to Global Industry
Surveys of Europe, during the first half of 2013, Europe’s 6.7% drop restricted global growth to
1.9% (1). This data shows the impact that Germany and Europe have on the global automotive
industry.
Trends
Many German companies have invested heavily in research and development, aiming to
put themselves at the cutting edge of technology and engineering. While fuel economy, and
environmentally friendly factors have been becoming increasingly important around the world,
Germany aims to create the best hybrid and electronic vehicles. In fact, Germany plans to
increase electric vehicle production from its current 2,000 units to over one million units by
2020. Germany’s federal government’s goal is to make Germany the leading market for electric
5
mobility. German manufacturers have also invested over 2 billion dollars in the research and
implementation of hydrogen-cell vehicles (5).
Cultural Analysis
Germany is one of the most culturally rich countries in the world. Being the most
populated country in Europe, Germany is the home to many
different people, and consists of a wide variety of
geographical terrains.
Geographical setting
The geographical setting of Germany is located in
Central Europe south of Denmark, between the Netherlands
and Poland. It borders the Baltic Sea and the North Sea.
The climate is temperate and marine with an occasional
warm mountain wind. Their winters and summers are cool,
cloudy, and wet.
The topography of Germany includes a plain with
lakes, moors, marshes, and heaths retreats from the sea.
The landscape has streams, rivers, valleys, woodlands and
hills which form into high plateaus and eventually
mountain ranges (1).
The potential effects of Germany’s geographical
setting has on marketing our product include the mountain terrain that may be a factor in
consumers’ decision in purchasing a small electronic vehicle.
Relevant history
Germany was occupied by the victorious allied powers of the US, UK, France, and the
Soviet Union in 1945 after being immersed in two devastating world wars. At the arrival of the
Cold War in 1949, two German states were formed: the western Federal Republic of Germany,
and the eastern German Democratic Republic. German unification was allowed by the end of the
Cold War and the decline of the USSR in 1990. Germany has been using funds to bring Eastern
productivity and wages up to Western standards. In January 1999, Germany and 10 other
European Union countries introduced the euro (1).
The official language of Germany is German and the regional or minority languages
include Lower Sorbian, North Frisian, Sater Frisian, and Upper Sorbian. Many Germans are
worried about the overwhelming influence of English on German. On many advertisements it is
typical to find a mix of both English and German. The dialects of German’s differ by three
different regions. The differences between each include vowel and consonant changes, different
word choices, and grammatical variations. The German script has pretty much disappeared in
modern Germany because of the negative reactions it gives such as being “fascist” and
“obsolete” (4).
Population:
80,996,685 (July 2014 est.)
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Estimated as of July 2014, Germany’s
population is close to 81 million people. The
population pyramid shown on the left
illustrates the age and sex structure of
Germany’s population in 2014. 41.7% of the
population is between the ages of 25-54 years
while only 10.6% is between the ages of 1524 years (1.)
As of 2014, the total world population is
estimated at 7.2 billion people. The bar graph
below shows the distribution of global
population by continent. 60.11% of the
population lives in Asia, compared with
10.24% in Europe, and only 4.88% in
Northern America (3).
The population of Germany is currently decreasing with an estimated growth rate at 0.18%. The birth rate is 8.42 births per 1,000 in the population, which is less than United States
at 13.42. The death rate in Germany is 11.29 deaths per 1,000 in the population, which is more
than United States at 8.15. Germany’s net migration rate is 1.06 migrants per 1,000 in the
population. Germany has a net migration rate of 1.06 migrants per 1,000 in the population.
A vast majority of Germany’s ethnic
group is German with 91.5%. The remainder is
2.4% Turkish, and 6.1% other which is made up
largely of Greek, Italian, Polish, Russian, SerboCroation and Spanish (1).
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Religion
The two main religions in Germany are equal between Protestant and Roman Catholic at
34% each of the population, leaving 3.7% Muslim and 28.3% unaffiliated or other. The role of
religion has decreased since 1945 during the Nazi era. Churches are sold and turned into
museums, church schools are closed and employees lose their jobs (4).
The literacy of Germany is almost perfect with 99% of the total population aged 15 and
over that can read and write. The education expenditure, which compares the public expenditure
on education as a percent of GDP, is 5.1% for Germany, compared at 5.4% for the United States.
In Germany, when a child reaches the age of 10 they take an exam to decide whether they should
be placed in one of four schools: primary school, secondary school, high school, or
comprehensive school (4).
Living conditions
The averaged population density is 230
people per square kilometer. The map on the right
depicts that 73.9% of the total population is in
urban areas including 3.462 million in Berlin,
1.796 million in Hamburg, 1.364 million in
Munich, and 1.006 million in Cologne (1).
The German diet is rich in fats,
carbohydrates, and sugar and lacking in fruits and
vegetables with a high consumption of alcohol
and tobacco. Specialists have estimated that 30 to
40 percent of the population has health problems
related to their diet, with 25.1% of adults being
obese (1). The drinking water source as well as
the sanitation facility access is improved at 100%
of population in both urban and rural areas of the
country.
Many cities in Germany have
Mitfahrzentralen, which is ride-sharing where drivers register who are looking for travelers to
share the costs of travel (4). In addition, Germany is known for having a well-organized public
transportation system including air traffic, trains, buses, trams, subways, private car rentals, and
bicycle leasing. According to Pop Culture! Germany, a surpising fact of foreigners to Germany is
that “almost all taxis are Mercedes” (4).
Business customs/etiquette
In Germany, a very good and positive first impression is one of the most important things
relating to business etiquette. Germany’s business attire includes business professional clothing
where men wear complete suits with a white shirt and tie, and women wear modestly cut
business suits, preferably not pants. Business clothing should be worn in either grey, navy, or
8
brown. Black is only worn for official occasions, not business meetings and women can wear a
bit more color. A rule of thumb for business clothing is, “the more senior your position, the more
conservative your style.” (2).
Each business meeting begins with associates’ and guests’ introductions by seniority and
smiles are not required. The exchange of business cards is done at the beginning of the meeting.
“The senior German manager is seated in the center with the next senior executive on his right.”
Germans tend to sit much farther away from each other than Asians, Americans, or other
Europeans during business meetings. It is considered an insult if one moves the furniture in a
German office, or moves a chair in closer. Germans do not like physical touch or gestures when
talking with another person. Business and private conversations are kept separate and most
Germans do not talk about their families in a business setting. German’s negotiating style is
known as a “long and painstaking process.” German’s are also known as “hard bargainers.” (2).
Cultural descriptors
There are six cultural descriptors of a country that present the cultural differences and
values between nations. Germany scores highest on pragmatism with a score of 83, compared
with the United States at 26 and the world average at 24. Being a pragmatic country, Germany
easily adapts their tradition to changed conditions and encourages thrift and modern education in
preparing for the future (5). Germany scores lowest on power distance with a score of 35,
compared with a 40 for the United States and 57 for the world average. Germany is among the
lower power distant countries due to it being highly decentralized and supported by a strong
middle class.
Germany’s society is focused on individualism and masculinity. The family lifestyle is
focused on relationships between the parent and child rather than aunts and uncles. They take
pride in honesty, loyalty, and communication with a strong belief in the ideal of selfactualization. As earlier discussed in Germany’s education system, performance is highly valued
and shown at an early age when children are separated into different types of schools. Many
people in Germany show their
social status through luxury items
such as car and watches.
Uncertainty avoidance
involves having prior knowledge to
think, plan, and present an idea or
project. Because of Germany’s low
score on power distance and
somewhat high score of 65 for
uncertainty avoidance, Germans
tend to prefer reliance on skills and
knowledge when dealing with
uncertainty.
Germany also has a low score of
40 for indulgence. This means that Germans are often skeptical or negative in planning and
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believe that they can have control of their desires. They find indulging themselves to be
somewhat wrong and that they should be cautious when having leisure time.
CBR
Germany is a country that has a low power distance country, and tends to sway away from being
flashy or over the top. Germans care a lot about family values, and prefer to take things into their
own hands. The widespread idea is that having knowledge and skills is better than hard work.
Nontheless, the German people are very hardworking, and believe that life does not just get
handed to you. There are high alcohol and tobacco consumption rates, and many foods tend to be
high in fat. For these reasons, there tend to be a certain level of health issues in Germany.
Political/Legal Analysis
Germany is a country with strong relations around the world. Being a member of NATO,
and having a strong economy, many countries tend to do business with Germany. Much like the
United States, Germany has a president that can serve two terms. In regards to corruption,
Germany is perceived to be slightly less corrupt than the United States. The German government
consists of three branches, similar to that of the United States. The judiciary system works on a
civil law basis.
Current relations with the U.S.
After World War II, the United States reestablished diplomatic relations with Germany in
1955. The United States is committed to preserving peace in Europe, and especially focuses on
Germany, as Germany is a key partner to the United States. The United States and Germany are
allies in the North Atlantic Treaty Organization (NATO), so they remain peaceful between each
other. In terms of economic relations, the US and Germany often conduct business together,
being two of the world’s leading nations in regards to trade. “The United States is Germany’s
leading export market outside the EU.” (1). In 2011, Germany exported over 97 million dollars
in goods to the United States. German firms also employ over 500,000 American workers. These
facts make Germany the fifth largest US trading partner in the world.
Political Risk Assessment
Germany has a Federal Republic government type, currently lead by the chief of state,
President Joachim Gauck, who was elected into office in March of 2012 (4). Presidents in
Germany are elected for a five year term, and much like the United States, they are eligible for a
second term. Each president is elected by a Federal Convention, which include all members of
parliament, and an equal number of delegates that are appointed by the state parliaments. Also
similar to the structure of the United States, there is an executive branch, legislative branch, and
judicial branch. Some political parties include, but are not limited to, the Alliance ‘90/Greens,
the Christian Democratic Union, the Christian Social Union, and the Social Democratic Party
(4). The German political system is a stable one, as political stability was a primary goal of the
developers of Germany’s basic law. The Basic Law established the supremacy of political
parties. Germany’s political powers have historically tended towards the center of spectrum in
regards business. (6).
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Level of corruption
According to Transparency.org, Germany scored a 78/100 on the Corruption Perceptions
Index. This index estimates and ranks countries based on how corrupt the country’s public
section is perceived to be (3). With a core of 0 being highly corrupt, and 100 being very clean,
Germany is perceived to be a generally non-corrupt country. The United States was rated at
73/100 on
the same
Corruption - Germany vs. United States
scale, thus
93
100
being
86
86
90
81
perceived
78
73
80
to be
70
slightly
60
more
50
corrupt
40
than
30
Germany,
20
but
10
0
Corruptions Perceptions
Index
Germany
Bribe Payers Index
Control of Corruption
United States of America
nonetheless, still on the cleaner side. In regards to the Bribe Payers Index, countries are scored
on a scale of 1 to 10, the higher the score for the country meaning the lower the likelihood of a
company from the country would engage in bribery when doing business abroad. Germany
scored an 8.6/10, while the United States scored an 8.1/10. Both countries are unlikely to engage
in bribery. Both countries are said to have a high control over corruption, with Germany ranking
at the 93% percentile rank in regards to corruption control, and the United States receiving a
percentile rank of 86%. On a global level. Given this information, Germany appears to be
slightly less corrupt than the United States of America. (3) All of this information is shown in the
graph titled “Corruption – Germany vs United States”.
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Judiciary system
The judicial branch in Germany is based around civil law system. The highest court in
Germany is the Federal Court of Justice, which consists of 127 judges including the Court
President and Vice-Presidents (4). The court is organized into 25 senates, and subdivided into 12
civil panels, 5 criminal panels, and 8 special panels (4).The equivalent to the Federal Court of
Justice in the United States is the US Supreme Court.
Participation in patent, trademark or other conventions.
In Germany, patents, trademarks, and other intellectual property are protected by law.
After registering for a trademark or patent trough the German Patent and Trade Mark Office, the
owner has the exclusive right to use the trademark in relation to the protected good or service.
Trademark owners can sell their trade mark at any time. Trademarks and patents can be renewed
and virtually last forever. However, registering for a trademark or patent in Germany will only
be effective in the Federal Republic of Germany. In order to extend a patent or trademark
internationally, the owner must apply to the World Intellectual Property Organization. (2)
Regulations & standards for this product
In Europe, there are a few regulation in regards to the electrification of cars. Rules on the
electrical safety of the batteries in a vehicle must be updated. Also, the absence of noise when an
electric vehicle is driving below 30 kilometers per hour is restricted. For this particular reason,
Nissan’s Leaf has built an artificial noise system in their products to ensure the vehicle is not
silent. Under Germany’s health and safety rules, a car battery is seen as a dangerous product.
With that being said, the batteries must be disposed of or recycled by a specialist battery rental
company. (5)
Political / Commercial Risk Management
In order to ensure the protection of assets, it is wise for a company to invest in export
credit insurance. One company in the United States that offers this protection is Global
Commercial Credit LLC, located in Bingham Farms, Missouri. GCC strives on bringing their
customers the maximum possible value, both domestically and internationally. Another company
that offers these services is Euler Hermes, which holds main offices in Chicago and New York.
Euler Hermes focuses on the avoidance of bad-debt loss, and ensures that your company will
make better-informed credit decisions and safely expand sales.
CBR
With a political structure similar to that of the United States, Germany’s government is
well regulated, stable, and not corrupt. While a small amount of corruption exists anywhere you
go, Germany is on the cleaner side of the spectrum in regards to corruption. Germany has strong
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trading relations with the United States, with the US being Germany’s largest export market. In
Germany, intellectual property is well protected under law, making Germany a relatively safe
place to conduct business. Germany operates under a Federal Republic government, which
undergoes elections into office.
Economic Analysis
The German economy is the fifth largest economy in the world, and is Europe’s largest
industrial giant. Germany holds a large, highly skilled labor force that has consistently made
technological advancements that have helped shape the world we live in today. Being a top
player in multiple industries, including the automotive industry, it is well worth it to any
company to consider implementing their business in the German market.
Economic Statistics & Activity
As of 2013, Germany’s gross domestic product is a substantial 3.635 trillion dollars (5),
and holds a gross national product of 3.591 trillion dollars (1). Over the last eight years,
Germany’s GDP has generally remained at a relatively steady level, but is slowly growing.
Germany’s per capita income last year was $44,540 (1), meaning the average income of a person
in Germany in 2013 was 44,540 dollars. While the United States holds a higher per capita
income, at $53,960, Germany’s income per capita is higher than many surrounding countries in
Europe. For example, France held a per capita income of $37,580 in 2013 (1). In regards to
inflation, Germany has seen a general rise in the general price level of goods and services over
the past five years. The annual inflation rates have been increasing year by year, rising from 0.81
percent in 2009 to 2.04 percent in 2012. In 2013, Germany saw its first decrease in inflation
since 2009, dropping back to 1.43 percent. (2). In comparison to the United States, annual
inflation in Germany has historically been slightly lower than that of the US. With that being
said, the United States has also experienced different trends in regards to change in inflation over
the years. In the past five years, inflation rates in the United States have fluctuated, experiencing
dramatic increases and decreases year by year. From 2009 to 2010, inflation in the US dropped
from 2.72 percent to 1.5 percent (2). In 2011, inflation rates turned around, and increased to 2.96
percent (2), and have been steadily dropping since. Germany’s levels of inflation tend to remain
steady, while inflation in the US tend to fluctuate more drastically year by year. All of this
information regarding the comparison between the United States and Germany is shown in the
graph titled “Inflation Rates – US vs. Germany”. While the economy in Germany is strong,
income distribution could be better. In 2006, Germany’s rating on the Gini Index was 27/100 (4),
0 being perfect equality in terms of wealth distribution.
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Inflation Rates - US vs. Germany
3.5
2.96
Inflation Rate (%)
3
2.72
2.5
1.98
2
1.5
1.5
1.5
1
2.04
1.74
0.81
1.31
2009
2010
1.43
0.5
0
2011
Year
Germany
2012
2013
United States
Natural Resources
Germany is a large producer of coal (4).
Transportation infrastructure
In comparison to the world, Germany ranks 16th in number of airports, with 539. In terms
of roadways, Germany has over 645,000 kilometers of paved roadways, including local roads
and expressways. The United States has a total of 4,304,715 kilometers of paved roadways. This
substantial difference between the United States and Germany puts into perspective the
differences in transportation infrastructure between the two countries. (4).
Communication infrastructure
Germany has one of the largest communication markets in all of Europe. There are over
50.7 million mainlines in use, which accounts for about 62.8 percent of the nation (4). Germany
also holds one of the most technologically advanced telecommunications systems in the world.
There are approximately 107 million cell phones in Germany, and with a population of only 80.5
million, there are enough cellular devices for over 132 percent of the population (4). In regards to
internet usage, 80.7 percent of the population regularly uses the internet. With over 65 million
internet users, Germany is placed at the fifth highest in terms of internet use compared to the rest
of the world (4). In comparison to the United States of America, Germany is a bit behind in
terms of internet usage. Approximately 90.1 percent of the US population uses the internet. The
United States are far bigger advocates of social media compared to Germany. According to
InternetWorldStats, only 31.3 percent of Germans are subscribed to Facebook, while 67 percent
of Americans use the prominent social network (3).
Labor Force
Germany has a strong economy driven by its monumental sized labor force. According to
the World Bank, Germany’s labor force in 2013 consisted of 41.7 million people. The
unemployment rate in Germany is 5.4 percent, meaning that of the 41.7 million people eligible to
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work in Germany, there are roughly 2.25 million Germans unemployed. The United States has
an unemployment rate of approximately 8.1 percent, showing that Germany’s economy is
slightly more stable than ours, with more employment opportunities for a larger percentage of
the labor force. (1)
Working Conditions
“Regulations between German employers and employees are extensively regulated under
German labor and employment law” (6). German employees receive maximum protection from
termination, and are given great benefits from employers. Germany is known to treat its working
class fairly, and is considered to be one of the best places to work in terms of fair working
practices. (6)
Principal Industries
Being the fifth largest economy in the world, Germany has many principle industries that
are responsible for their economic successes. Germany is a leading exporter in machinery,
vehicles, chemicals, and household equipment (4). With that being said, Germany is particularly
known for its high quality automobile manufacturing industry. Worldwide known brands such as
BMW, Volkswagen, Mercedes Benz, and Audi are among the largest automobile companies in
the world, and they are all based around German engineering. Each of these companies are
traded publically around the world. Germany is also leading producers of iron, steel, coal,
cement, electronics, food and beverages, shipbuilding, textiles, and more. (4)
CBR
Germany has a strong economy that specializes in the automotive industry, among other
things. Their strong labor force is recognized throughout the world, and working conditions are
seen as some of the fairest in the world in regards to employer-employee relationships. In terms
of communication, Germany is among the most technologically advanced, and are regular users
of the internet. Germany’s economy is a powerhouse in the world, and is Europe’s most
influential business-driven country.
Trade Policy Issues
The German drive for success, with a heavy focus on engineering and quality, has pushed
Germany to the forefront of international trade. As it stands, Germany is third largest
international trading country with only the United States and China ahead (1). Germany is the
most powerful member within the EU, and isn’t afraid to flex on issues of German Interest. As
time passes, it is becoming commonplace for Germany to take stances within the EU to push for
free trade agreements that are seen as being both beneficial to them and their EU compatriots.
However, because Germany belongs to this politico-economic union, trading can sometimes be
difficult when concerning certain industries due to the existence of two governing bodies, the EU
and the Country itself.
European Union
To fully understand Germany, we must first understand what the European Union is. The
European Union is an economic union between 28 members. At the furthest levels of economic
15
integration there is a free flow of products and factors of production, an adoption of a common
external trade policy, and in addition, a common currency, harmonization of country member tax
rates, as well as a common monetary and fiscal policy between members states. (2) An important
note is that Member states within the EU can still have additional governing bodies within their
country that raise barriers to trade apart from the EU itself.
The World Trade Organization
Germany joined the WTO on January 1st, 1995 (3). However, talking about the WTO
and solely Germany is quite difficult due to its membership in the European Union. That
mentioned, all 28 members of the EU, and the EU itself, belong to the WTO. Due to the
interconnectedness of the members within the EU. Issues concerning trade can stagnate due to
each member’s different outlook on situations. However, this does not completely bog down the
main goal surrounding members of the EU and their membership within the WTO which is the
fostering of free trade (4).
Harmonized System Codes
The EU uses a 6 digit harmonized system code with 2 additional possible digits relating
to the EU, while the last 2 are community numbers. On the flip-side, the United States follows a
10 digit Schedule B harmonized code. The subheading for the code that would be used for
Germany, concerning the Chevrolet volt, would be 8703221000(5). A breakdown follows.
Unfortunately, there is now visible or crafty way to reclassify the product that could be initially
seen. As a result this HS# is the only one visible and available relating to the Chevrolet Volt.
Subheading
87xxxxxxxx
8703xxxxxx
87032xxxxx
870322xxxx
8703221000
Subheading hierarchy with description
VEHICLES OTHER THAN RAILWAY OR
TRAMWAY ROLLING STOCK, AND
PARTS AND ACCESSORIES THEREOF
Motor cars and other motor vehicles
principally designed for the transport of
persons (other than those of heading 87.02),
including station wagons and racing cars.
Other vehicles, with spark-ignition internal
combustion reciprocating piston engine
Of a cylinder capacity exceeding 1,000 cc but
not exceeding 1,500 cc
A new product
Trade Barriers
Research revealed no quotas surrounding the automotive market. Most apparent trade
barriers to Germany are those related to EU common external policy mostly regarding other
countries mostly in the form of import requirements documentation. However, Germany does
utilize a turnover import tax which is 19% which is levied in order to equal the VAT of the
EU.(6) An additional barrier to trade, aside from a 10% Tariff on US automotive imports, is the
German Automotive Authority: Kraftfahrt-Bundesamt or KBA (7). The KBA approves vehicle
types and parts as well as proposes safety regulation for vehicles which is complex and stringent
when compared to US automotive safety.
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A Possible Circumvent
Exploration of tariffs and duties related to the United States revealed a 10% automotive
export tariff to Germany. However, existence of a South Korea- EU FTA exposed a 5% Tariff
between these two countries.(8) Upon further research, it was discovered that the EU and SK set
up a FTA in 2011 eliminating many obstacles to trade. Consideration for a manufacturing plant
may be a way to circumvent and take advantage of the 5% difference if other conditions relating
to South Korea are conducive and supporting to US FDI.
US and German Trade
The United States and the European Union share the largest economic relationship in the
world with Germany playing the biggest part. The following graph represents Trade with
Germany during the 2012 - 2013 fiscal year. Additionally, The United States has been importing
more from Germany than it has been exporting for more than 30 consecutive years. The most
pertinent of this import and export information is that the United States Exported close to 5
billion dollars to Germany in the Automobile industry alone. However, we imported close to 25
billion dollars in German vehicles (9).
*”The Top 10 countries That Trade with the US” http://www.census.gov/foreign-trade/top/dst/current/balance.html, Accessed
November 3, 2014
Supporting US Agencies
The US government offers many services regarding exporting to Germany. These
supporting agencies offer a wide array of services, including but not limited to: trade counseling,
market intelligence, business matchmaking, and commercial diplomacy. Contacting these
agencies and taking advantage of the services they offer may offer an edge and will help us avoid
and mishaps with Trade policy between the EU and Germany. (10)
CBR
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Germany dominates the International trade scene and as the largest player of the EU
pushing for FTA with other nations. Germany imports close to 5 billion dollars from the US
Automotive industry which points to a possibility for the export of Chevrolet Volt. Making sure
we do our homework on safety-regulation requirements as well as including import
documentations point that we should be able to sell in Germany without a hitch. Further research
regarding South Korea and the European Union free trade agreement of 2011 should be
considered due to a 5% decrease in tariffs compared to the United States.
Financial Analysis
The currency of Germany is the Euro. The Euro is used in 12 of the member countries as
well as some other various regions across the world. The Maastricht Treaty of 1991 committed
members, who fit criteria of the European Economic and Monetary union, to adopt a single
interest rate, currency, and bank(1). The headquarters for the Euro Bank, European System of
Central Banks or ECB, is located in Frankfurt Germany (2). The ECB has the sole authority to
set Euro monetary policy.
Members Countries using the Euro Currency
Belgium
Germany
Greece
Spain
France
Ireland
Italy
Luxemburg
The Netherlands
Austria
Portugal
Finland
*Graph created based on data from http://www.gocurrency.com/countries/euro
Currency Hard or Soft; Investment Barriers
The Euro is considered one of the world’s hard currencies (3). That is, the Euro is
perceived as a promising currency and which the world expects to serve as a reliable store of
value. Factors that are related to the Euro being considered a dependable currency is related to
the member country’s fiscal and political conditions as well as the formation of a central bank
authority. However, with the recent Economic crisis of 2008 the Euro may lose its reliability as a
hard currency as nations falter in their perception of the currency as the Euro begins to deflate.
U.S. EX-IM Bank
The U.S Export-Import Bank is the official export credit agency of the United States
which provides financing assistance to companies whom wish to export to other countries. This
independent government agency takes on the burden related to credit and country risk that other
organizations do not find favorable. This allows U.S exporters dive into new markets with less
risk, and efficiently operate on the global market (4). Chevrolet could make use of the U.S EXIM Bank’s services, which would mitigate risks involved with entering Germany.
Exchange Rates
Exchange rates from USD to Euro, 1 year History, as of Nov 17, 2014 (5).
18
19
Exchange rates from USD to Euro, 5 year History, as of Nov 17, 2014 (5).
As of Nov 17, 2014 1USD = 0.7988 Euros.
Foreign Exchange Risk and Implications
With the recent advent of the strong US dollar, this year alone we have a seen a 5%
increase against the Euro (6). This makes it better for the US as an economy to buy imports due
to a greater bang for the US dollar. This is however bad news for countries on the other end as
they are receiving less than what they did before (7). The ECB however plans to counter this
deflation by formulating a bond buying plan similar to what the United States did during its years
of recession. It is also important to note that Germany does not have any imposed cash payment
limits that would suggest further increased risk (8). Currently Germany receives no receives no
aid from the IMF.
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CBR
While the Euro is considered a hard and dependable currency, the volatile rates of the
Euro creates exchange risk for Chevrolet under the guise of finances. The possibility that the
euro is headed towards deflation with a rising US dollar would make it less than conducive to
open operations in Germany itself. Waiting to see how exchange trends play over a longer period
of time as well as watching as to if the ECB implements a bond buying program would mitigate
this risk in the long term. Exporting to Germany, given the situation, would be considered the
safest and less risky alternative as opposed to starting operations, via FDI, given the currency
risk climate.
Competitive Environment
Germany is known as being a frontrunner in the automotive industry worldwide. With ten
patents registered each day pertaining to automobiles the industry is ever-evolving. There is a
massive amount of competition for German market share in the automotive industry, as well as
the electric car industry. It also seems that U.S. trends do not equate to Germany. The Volt is the
best-selling electric car in America, however, its volume of sales doesn’t even crack the top ten
in Germany. A big issue in Germany is the widespread belief that German cars are far superior in
almost every way to American made cars. Germans believe that they are much more reliable,
higher performing, and an overall better ride.
From 2009 to 2012 United States vehicle exports to Germany have ranked the third most
out of any export market in the world, only behind US bordering countries Canada and Mexico.
The rough total number of exported cars from the US to Germany in this time frame is 535,076
units totaling 5.9 billion dollars (1).
Country
Canada
Mexico
Germany
Country
Canada
Germany
U.S. Exports of New Passenger Vehicles
2009
2010
2011
577,762
720,428
736,942
112,080
140,464
153,899
113,676
99,414
149,841
2012
748,094
173,146
172,145
U.S. Exports of New Passenger Vehicles (In Millions of Dollars)
2009
2010
2011
2012
12,652
16,996
17,903
18,776
4,360
3,634
5,122
5,858
Market Shares/Competitors
In 2013, there were 7,634 electric cars sold in Germany, the third highest of any
European nation. In 2014 the year to date sales of electric cars in Germany totals 4,320, and the
Chevrolet Volt only accounts for 11 of these sales. The top five cars in the industry hold a
remarkable 75% of the electric vehicle market share. The BMW i3, the VW E-up, and the Smart
Fortwo electric drive hold the top three spots in German electric car market share. In total there
are 16 other cars that the Volt is competing with (2).
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BMW
BMW was founded in 1917 and is a German car company. They are focused on the
premium sector of the automobile industry which has propelled them to being one of the ten
largest car manufacturers in the world. The brand BMW has become synonymous with the
qualities of high performance, engineering excellence, and innovation.
The BMW i3 was engineered to be in the same product class as the Chevrolet Volt. With
a liquid-cooled 22kilowatt-hour battery pack, it is capable of traveling 80 miles on a single
charge.. Unlike the Volt, it is a very short, but tall car. As for its charging capabilities the BMW
i3 can go up to 80% charged in just 20 to 30 minutes. The i3 accounted for 1,167 of total electric
car sales in Germany so far in 2014 making BMW hold the largest market share in the industry.
(3).
Volkswagen
Volkswagen, or VW, is another
German car company that has a wide
range of product offerings. They hold a
12.8 percent market share of the world
passenger car market. In Western Europe
almost one of every four new cars is made
by VW. They comprise of twelve different
brands. They believe that the technological
challenges of the future will be conquered
by research and by the advancement of
sustainable technologies.
One of these most recent
advancements is the Volkswagen E-up. Much like the i3, the E-up offers a charge range of about
99 miles. However it is a much slower and a little bit pricier than the i3. And it also doesn’t offer
the option of using gas after the charge has run out. It was built out of the fact that there are a
large amount of cars in the UK that do not travel more than 15 to 20 miles per day. The E-up
accounted for 777 of the total electric vehicle purchases up to this point in Germany, holding the
second highest market share (4).
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Smart
Smart created the Smart Fortwo
that is the third best-selling electric vehicle
in Germany. This model has been a
concept since the mid-90s and the goal
was realized a few years later with huge
success. It was the first of its kind to offer
a vehicle that was able to run on an
electric charge. It also has the capabilities
of running on gas as well.
The Smart Fortwo is very similar
to the previous two cars, its 17.6 kWh
battery allows the driver to travel 76 city
miles, or 59 highway miles, or 68 combined. Its charge time is roughly an hour and a half per
25% charge. So a full charge will take 6 hours, while a charge up to max capacity from 20% will
take four and a half hours. It also has the capability of running on gas for a short while, a
combined estimation of 107 miles. The Fortwo has sold 505 units in Germany so far, the third
highest of any electric vehicle. (5).
Product Attribute Matrix
Car
Charge Distance
MPG
Price
0-60 MPH
Chevy Volt
38 Miles
37 MPG
$34,345
9.1 S
BMW i3
81-100 Miles
-
$41,345
6.5 S
VW E-up
99 Miles
-
$34,500
12.4 S
Smart
Electric Drive
68 Miles
-
$13,270
22.4 S
(3), (4), (5)
Strengths and Weaknesses
Each product aforementioned has its own unique characteristics that it can offer the many
markets for electric cars. The two most similar products that have been discussed are the
Chevrolet Volt, as well as the VW E-up. Botha are similarly priced and sized with similar
performance specs. These two cars focus on the everyday individual who doesn’t have to drive a
long distance very often. Making it a very practical and wise choice for somebody in this
position. However, a major disadvantage for the E-up is the fact that they do not have the ability
to also run on gasoline. This is really where the Volt separates itself from the Volkswagen.
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As for the BMW i3. The fact that it has the largest charge distance along with the fastest
time from 0-60 MPG is the reason why it is the highest priced vehicle on the list. This vehicle is
more geared to the practical individual who still has a desire for a car that has a decent amount of
performance capabilities. It is no doubt for the individuals on the upper end of the economical
scale in the target market.
The Smart Fortwo might be the most practical car out of all because it is the cheapest.
However this is where the advantages in. It does not perform as well as the others and it doesn’t
have as large as a charge distance as the other two purely electric vehicles that sell better than the
Volt. This car is extremely focused on targeting the lower income class customers who want to
be environmentally conscious, but a the most reasonable price.
Overall, the Volt seems to stack up pretty well against all of these competitors. However,
there is one major thing standing in its way, the fact that VW and BMW are both German car
brands. This kind of brand loyalty goes a long way. The fact that consumers in Germany are
familiar and comfortable with these brands gives it a large advantage over Chevrolet and its Volt.
CBR
The fact that there is intense competition at the upper point of market share hold is a good
sign for the Volt. They need to overcome one major hurdle though, and that is gaining the trust
of the German market. The two best selling cars are both German made. This means that if
Chevrolet and the Volt want to be successful in this market they have to show that their brand
offers more than their competitors. One of the biggest thing that sets the Volt apart from its
competition in this aspect is the fact that their vehicle has the ability to run on gasoline after its
electric charge runs out. If the Volt can gain some traction in the German market, then it could
see a large upward swing in popularity, and revenue for General Motors.
Marketing Mix Analysis
Product
Primary target
The primary target market for the use of the Chevrolet Volt is middle-class families that
share similar interests, opinions, and hobbies. With the focus on Green Marketing in the world
today, many consumers are looking for more eco-friendly vehicles. With increasing gas prices
many consumers will find the Volt a very appealing vehicle. This age range is between 25-60
years of age with a focus on male and females. We plan to focus on the middle-class who live in
urban areas. Electric vehicle charging stations are well penetrated in the German market. This
would help the adoption of the Chevrolet Volt electric vehicle in the area. Chevrolet’s plan to
decrease the price $10,000 will make this eco-friendly vehicle more affordable for the middleclass and more appealing to the mass market (1). With the decrease of price we are targeting
individuals with incomes that range from $30,000 – $80,000.
“On a full battery charge, the Volt is capable of traveling over 40 miles. A study found that this
distance satisfies nearly three quarters of American daily commutes.” (2)
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The main focus would be on highly populated areas in Germany like Berlin, Hamburg,
Munich, and Cologne. This would focus on the commuters in urban areas who would benefit
from this electric vehicle.
Since the final user is B to C, the primary target market will focus on individuals who are
innovators and experiencers.
According to the eight segments on the VALS survey, “Innovators are change leaders and
are the most receptive to new ideas and technologies. Experiencers are motivated by selfexpression and are young, enthusiastic, and impulsive consumers.” (4)
These psychographic traits are the suggested primary focus for the main buyer of the
Chevrolet Volt. We want to focus on those who share similar interests, opinions, and hobbies so
these innovators and experiencers play a huge role on our primary target.
Secondary target
The secondary target market for the use of the Chevrolet Volt is the early adopters of new
technology, the generation y of the world.
“Early on, we talked a lot about whether our initial target market would be the techies or the
greens,” said Cristi Landy, the Volt’s product marketing director. “And we concluded that it
would be the techies, which we confirmed with our first customer surveys.” (3)
The secondary market is focused at the future generation of drivers. The millennial’s are
the ones who are the early adopters of technology and appreciate the environment. By the use of
technology, consumers would be more focused on plugging in rather than filling up. The main
reason of this primary market is because of the technology built into the Chevrolet Volt.
Millennials will appreciate the Chevrolet Volt due to its innovative technology. This age range
is between 16-30 years of age focused on both males and females.
Potential problems
There are many problems that arise with the Chevrolet Volt in Europe. Opel is a German
automobile manufacturer and is a subsidiary of the General Motors Company. Problems that
have risen from this are the pricing of the vehicles and the origin of manufacturing of the
vehicles.
According to Trefis, “Chevrolet had never been a popular brand in Europe, mostly because the
perception of its cars did not gel with the brand image they were being sold with. It turned off
customers who were asked to pay much higher prices for low-cost car.” (2)
The decrease in price will allow the Chevrolet Volt to appeal to our secondary market
more effectively than before. This will allow us to build brand equity in Europe by allowing
customers to purchase our vehicle at the right price. Another potential problem is the origin
assessment of the vehicle. We plan to manufacture the vehicle in the United States and export it
to Germany. This could cause a problem to the market because it is not assembled in Germany.
We believe the vehicle itself is the right fit for the German market regardless of where it is
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assembled. Our plan to avoid this problem is the price reduction and its ability to run on gas or
electricity. We plan to make the vehicle more affordable to appeal to more than just the upperclass. Also the Chevrolet Volt offers more than just electric, it offers new technology that will
appeal to our primary target.
Distribution
Establishing a strong distribution plan is crucial for success in a market. Making the
product available to the consumer is ideal when entering a new market. A distribution plan is
ideal for the position of a company’s product and is critical for the Chevrolet Volt to be
successful in Germany.
Neovia Logistics
One company we plan on using to export our product is Neovia Logistics. Neovia is a
global, industrial contract logistics company. With expertise in global transportation, Neovia
also offers warehousing and distribution services. The company has global presence in 6
continents, 25 countries, 96 customer locations, and they ship to over 190 countries. (3)
Adcom Wordwide
Adcom Worldwide has been shipping automobiles around the world for over 15 years.
They have the expertise and experience to handle special requirements associated with
automobile shipping. Adcom offers a large amount of automobile shipping services and
specializes in customized services for automobile exports from the USA to Europe. They handle
all of the paperwork required and ensure the correct services when unloading at destination.
Some of Adcom services include an initial vehicle survey, protection of the automobile in transit,
proper loading procedures, securing proper export documentation, and unloading at destination.
(2)
In order to grow market share in Germany we will use an exclusive distribution plan.
This means we will give one merchant the right to sell our product in Germany. This will help
us distribute to our 4 key targets in Germany as well as allow a single dealer to carry inventory
and provide the services needed. This will also allow for the dealer to develop a quality image of
the brand and promote the product effectively. The use of an exclusive distribution plan will
build a strong image, channel control, ensure price stability and will emphasize on personal
selling and strong customer service. Since we are manufacturing the car in the United States we
wanted to avoid any potential problems that could occur from the origin of assembly. This is
why we are utilizing Opel (a German automobile manufacturer and a subsidiary of the America
General Motors Company) to distribute and sell the Chevrolet Volt (1). Chevrolet being an
American made vehicle, we believe utilizing Opel will help establish the product with the
German market. Opel has a contract with Neovia Logistics who will help distribute the
Chevrolet Volt to key locations throughout Germany.
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The role of the internet as a mechanism for consumer purchase is important for us. The
internet offers reliable information about the vehicle as well as customization and purchase.
Consumers are able to utilize the Chevrolet website to find information regarding the vehicles
price, accessories, colors, specs, overview, and can find a dealer with an available vehicle. This
is essential and can help boost sales specifically in Germany. Utilizing the Chevrolet Europe
website, consumers will be able to look up, view, and price
out the vehicle before going to a specific dealer. The
website allows the customer to look up specific areas in
Germany to determine these locations.
We will use a phased introduction strategy to offer
the Chevrolet Volt in Germany. The primary target market
focuses on highly populated urban areas. With this focus,
the 4 main cities we would focus on would be Berlin,
Hamburg, Munich, and Cologne. This will give us the
opportunity to initially focus on our primary target market.
Also these are the four most populated areas in Germany
which will make for a perfect market test. The product will
travel by water and arrive at the Port of Hamburg.
Chevrolet Volt
Manufacturing Plant
Opel Distribution
Center
Neovia Logistics
Company
Delearship
Port of Hamburg
Final Consumer
From Hamburg, The
product will be shipped
directly to Hamburg and
Berlin locations. The other
vehicles will be distributed
to Opel’s distribution Center
to then transport to Munich
and Cologne by road.
The Chevrolet Volt will be manufactured in Hamtramck, Michigan. From here the
vehicles will be picked up by the Neovia Logistics Company and shipped via ocean to the Port of
Hamburg. Neovia Logistics will coordinate routes to the Opel Center in Russelsheim, Germany.
Opel is a well established German automobile manufacturer so our plan is to coordinate the
27
Chevrolet Volt with dealerships that sell Opel’s vehicles. From Russelsheim, the product will
then be shipped to the dealership in the four cities that are our main focus. Direct contact with
Opel will allow us distribute our product effectively and efficiently.
Price
Providing the right price is one of the most important elements when selling a product.
When trying to obtain a new market, price is a competitive tool used to attract a potential buyer.
Pricing is the only element of the marketing mix that generates revenue. The product must be
priced correctly to position itself well in the marketplace. We recommend using a Penetration
Pricing strategy in order generate sales in Germany. This will allow us to offer lower prices to
generate sales with price sensitive consumers. In order for this American vehicle to generate
sales in Europe we need to offer the vehicle at the right price so it will appeal to our target
market. This pricing strategy is a good fit for the Chevrolet Volt because it will help obtain
market share in Germany and compete against European manufactured vehicles. Establishing
market share in this way is extremely important because European made electric vehicles,
specifically German made, are the best-selling in Germany at this time.
In order to set a price in Germany, there are a couple factors which must be taken into
account. When importing a car to Germany, the MFN, or most favored nation rate is 10%. And
because the US is on that list for Germany, that is the rate that General Motors would be charged
when importing a car. One other factor taken into account, but less important is the German
value added tax of 19% (5). This information must be taken into consideration when pricing the
Volt in the German automotive market. To establish the initial base cost in the U.S. market, it is
necessary to work backward and take off all markups that bring the Chevrolet Volt to its MSRP.
The MSRP of a Chevrolet Volt is $34,185, by reducing this price by taking away the following
markups: 15% for retail, 20% for distribution, and 30% from the manufacturer, we arrive at
roughly $16,272. This means that in order to export one Chevrolet Volt to a German car dealer
the cost would be about $21,300. However, this doesn’t leave any room for General Motors to
make a profit on the export. This is where our penetration pricing strategy comes into place. But
only adding a 10% markup, it will create very slim margins initially for General Motors. About a
profit of $2,130 per Volt exported. However, this still allows for a dealer to make a decent profit
as well, while creating a better price point than our major competitors and current market
leaders. As stated in the competitive analysis, the two best selling cars are priced in the mid 30thousands of US dollars, and the low 40-thousands of US dollars. The most important thing for
General Motors at this stage of their product introduction is to have it gain traction and
popularity in Germany. By creating this advantage over our competition they can overcome
certain barriers to entry, such as current brand loyalty to German made electric vehicles.
In order to process these transactions with the German market, the best idea for General
Motors would be to accept payment in a combination of letters of credit and open accounts. For
individuals importing the Chevrolet Volt directly from the United States, a letter of credit would
be required because it is a bank guarantee of payment. This essentially cuts out the middle man,
for example a German automobile dealership that imported the Volt. Car dealerships such as
these will also be a key contributor to the success or failure of the market penetration attempt. A
dealership with solid credit which is requesting to import the Volt in a bulk number would be
allowed to open an account with General Motors. The idea here is to extend a buffer zone for
these dealerships to get the product into consumers’ hands. This way a dealer doesn’t have to
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incur a massive initial cost just to possess GM’s export. GM has the luxury to be able to do this
because they are a large enough company that could sustain short-term losses because of this
strategy, in order to facilitate long-term gains once the Volt establishes substantial market share
in the German electric vehicle industry.
Promotion
In order to reach both the primary and secondary market that GM has chosen they would
need to communicate messages across many different platforms. A highly used platform in
German marketing efforts is the use of advertising in trade journals. There are over 3,600 trade
journals in Germany which cover any type of product imaginable (8).
Top Gear Magazine is one of the most popular magazines in Germany, getting a cover
spot on this magazine would reach the secondary target market extremely well because they are
considered the early adopters of technology, which means they use the media to keep up with
new and exciting cultural trends (7).
The use of billboards could be used to reach the primary target market. A clean
advertisement that simply lists product features, advantages, and benefits placed in all of the four
cities mentioned above would put the Chevrolet Volt into the awareness set of consumers, which
is the first step in converting any kind of sale or market penetration. The four target market cities
have a total population of 7.696 million people. Meaning that those who live in these cities and
also work in them will see these advertisements while likely driving short distances to and from
their place of work.
A strategy that is used on US soil is to set up events in order for consumers to experience
Chevrolet products with their five senses. A marketing strategy known as experiential marketing
(4). This strategy could be used in Germany at popular events, such as Oktoberfest, the Formula
1 race held in Hockenheim, the Berlin Music Festival, and even German national team soccer
matches. Using this versatile form of reaching potential consumers, Chevrolet could expose the
Volt to not only both members of the Primary and Secondary target market, but even to people
who they believed not to be in the market for a Chevrolet Volt.
Last, getting ad space on the internet would greatly spread the word of the Chevrolet
Volt. 86% of the German population are active internet users as of December 31st, 2013 (1). By
putting up ad space on webpage’s pertaining to fuel efficiency and electric cars GM could tap
into the secondary target market who are experiencers and more likely to try new things.
A celebrity endorser that GM could utilize as a brand ambassador would be one of the
hosts from the TV show Top Gear, Jeremy Clarkson (6). Top Gear is an immensely popular
program in Europe and is all about testing cars based on performance, durability, practicality,
amongst a plethora of other things. Getting a brand Ambassador who has been informing the
public about automobile quality since 1988 would lend a large amount of credibility to the
Chevrolet Volt. It would help strike down some of the stereotypes of American made cars being
lower in quality because a credible source from Europe endorses it.
The I-Mobility trade show is a very new trade show to Germany and is focused on new,
renewable ways for transportation. In its first year over 700,000 people attended. This year there
29
are plans to show VW electric cars, as well as Toyota. GM should target this trade show as a way
to show the German public the superior technology and options that are available in the
Chevrolet Volt compared to its competitors (3).
A huge factor that General Motors will leverage is the fact that Germany is undergoing a
huge shift towards electric cars. The German government has a goal in place to reach 1 million
electric powered cars in use by 2020. This presents a massive market opportunity for GM and the
Volt to snatch up as much market share as they can when this industry is developing at the
highest rate it is likely to ever hit (2).
Ad Media Schedule
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Magazine
Billboard
Events
Internet
Each of these forms of media can be run 365 days a year because there is little to no
maintenance with them, and no adverse effects because of weather. Summer is peak new car
buying time, which is why the events will run yearlong with the exception of winter. The
exclusion of winter is due to the fact that ROI based on number of impressions made as well as
leads collected will drastically decrease at an outdoor event based on the cold weather, causing it
to not make economic sense.
Conclusion
Given a number of factors including Germany’s culture, mindset, economy, and the
automotive industry’s competitive nature, it would be difficult to find success for the Chevrolet
Volt in Germany. Educating consumers about the great benefits of this American vehicle would
be a difficult task in itself. Germans tend to have the mindset that German made vehicles are
highly superior to American products. Many of Chevrolet’s biggest competitors have been very
successful in the automotive industry after introducing their very own vehicles. Given the
culture, it is safe to say that the majority of Germans will continue to purchase German electric
cars, such as BMW or Volkswagen.
Although factors such as intellectual property protection, trade taxes and tariffs show that
doing business in Germany would be relatively easy, there are other factors that make exporting
the Chevy Volt difficult. For example, the automotive industry has been fluctuating in Germany,
and was on a decline as of last year. Another factor that comes into play is the fact that Germans
automotive industry is already so large, and they primarily export their vehicles, rather than
30
import. Based on our research, it is recommended that the Chevrolet Volt should not be exported
into Germany, because its success may be compromised.
References
Industry Category
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13, 2014. Available from
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1&u=ilstu_milner&it=r&p=GVRL&sw=w&asid=6510e7dd2762114f5e4e15e58c5082ef>
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<http://globaledge.msu.edu/industries/transport-manufacturing/background>
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5. Germany Boosts Electric Vehicle Development. (2014, January 1). Retrieved November 18,
2014, from http://www.worldwatch.org/node/6251 8
Cultural Analysis
1. CIA- The World Factbook. Germany. Accessed November 10, 2014. Available from
<https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html>.
2. ZATOR-PELJAN, J. (2013). Business Etiquette in Poland, Germany, France and China: an
Intercultural Approach. Global Management Journal, 5(1), 46-52.
3. Distribution of the global population 2014. Accessed November 11, 2014. Available from
<http://www.statista.com/statistics/237584/distribution-of-the-world-population-bycontinent/>
4. Fraser, Catherine C.,Hoffmann, Dierk O. (2006) Pop culture Germany! :media, arts, and
lifestyle Santa Barbara, Calif.
31
5. THE HOFSTEDE CENTRE. (n.d.). Retrieved November 9, 2014, from http://geerthofstede.com/germany.html
Political Legal
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2014.
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Economic Analysis
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from http://www.inflation.eu/inflation-rates/germany/historic-inflation/cpi-inflationgermany.aspx
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https://www.cia.gov/library/publications/the-world-factbook/
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18, 2014, from
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Trade Policy Issues
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November 12, 2014. From
http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/index.aspx
2. Cavusgil, T., Knight, G., Riesenberger, J. (2014) International Business: The New Realities.
The International Monetary and Financial Environment, 11, 272-291.
3. Members and Observers: Understanding the WTO. Accessed November 4, 2014. from
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32
4. Office of the United States Trade Representative: The European Union (November 2014).
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http://www.uscib.org/?documentID=1676
7. Navigation and service. Retrieved November 18, 2014, from
http://www.kba.de/EN/Home/home_node.html
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http://ec.europa.eu/taxation_customs/dds2/taric/measures.jsp?Lang=en&SimDate=20141118
&Area=KR&Taric=8703221000&LangDescr=en
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https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html.
Financial Analysis
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http://www.gocurrency.com/countries/euro>.
2. ECB Tasks. Retrieved November 12, 2014, from
http://www.ecb.europa.eu/ecb/tasks/html/index.en.html
3. World Heritage Encyclopedia. (2014, January 1). Retrieved November 17, 2014, from
http://www.worldheritage.org/articles/Hard_currency
4. “EXIM: About Us” Retrieved November 15, 2014, from http://www.exim.gov/ExportCredit-Insurance-Insure-Your-Accounts-Receivable.cfm
5. "Currency Converter." Yahoo! Finance. 8 Nov. 2014 from
http://finance.yahoo.com/currencyconverter/?amt=1&from=usd&to=cny&submit=convert#from=USD;to=EUR;amt=1.
6. La Monica, P. (2014, September 2). The U.S. dollar is super strong now. Retrieved
November 16, 2014, from http://money.cnn.com/2014/09/02/investing/strong-us-dollar-euroweak-ecb/
7. Chandler, M. (2014, November 17). Follow The Money. Retrieved November 17, 2014, from
http://www.economywatch.com/features/The-Strong-US-Dollar-Trend-Continues.11-1714.html
8. Europe: Paying by cash? Find out the legal limits before doing so. (2014, January 27).
Retrieved November 17, 2014, from http://blogs.angloinfo.com/angloinfo-worldmoney/2014/01/27/europe-paying-by-cash-find-out-the-legal-limits-before-doing-so/
Competitive Analysis
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Retrieved October 15, 2014, from
33
2.
3.
4.
5.
6.
http://trade.gov/mas/manufacturing/oaai/build/groups/public/@tg_oaai/documents/webconte
nt/tg_oaai_004086.pdf
Top Plug-in Vehicles in Germany. (2014, November 1). Retrieved November 6, 2014.
BMW i3 Review. (n.d.). Retrieved November 8, 2014, from
http://www.plugincars.com/bmw-i3.html
Volkswagen E-up! (n.d.). Retrieved November 8, 2014, from
http://insideevs.com/volkswagen-e-up-priced-from-e26900-34500-usd-et-le-ouch/
The Group. (n.d.). Retrieved November 8, 2014, from
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Product
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3. Ransom, K. (2011). Target buyers are techies not greenies. Automotive News. Retrieved
November 13, 2014, from Business Source Complete
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http://www.strategicbusinessinsights.com/vals/ustypes/experiencers.shtml
Distribution
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http://www.opel.com/company/locations.html
2. Automobile Shipping. (n.d.). Retrieved November 13, 2014, from
http://www.adcomworldwide.com/main.php?action=auto_ship_us_euro
3. Automotive Logistics | Neovia Logistics. (n.d.). Retrieved November 14, 2014, from
http://www.neovialogistics.com/industry-solutions/automotive.aspx
4. U.S. Exporting Companies 2011. (n.d.). Retrieved November 14, 2014, from
http://www.trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ian_0
04048.pdf
Price and Promotion
1. European Union Internet Usage and Population Stats. (n.d.). Retrieved November 18, 2014,
from http://www.internetworldstats.com/europa.htm
2. Germany Boosts Electric Vehicle Development. (n.d.). Retrieved November 18, 2014, from
http://www.worldwatch.org/node/6251
34
3. I-Mobility Exhibition. (n.d.). Retrieved November 18, 2014, from http://10times.com/imobility-exhibition
4. OFFERINGS. (n.d.). Retrieved November 18, 2014, from
http://jackmorton.com/offerings/default.aspx
5. Tariff Programs. (n.d.). Retrieved November 15, 2014, from
http://dataweb.usitc.gov/scripts/trade_program/trade_program_group.asp?country_group=NT
R
6. Top Gear Hosts. (n.d.). Retrieved November 18, 2014, from
http://www.bbcamerica.com/top-gear/hosts/
7. "Top Gear magazine" (n.d.). Retrieved November 18, 2014, from
http://www.topgear.com/uk/tags/Top-Gear-magazine
8. Why Start a Business in Germany. (n.d.). Retrieved November 14, 2014, from
http://www.startupoverseas.co.uk/starting-a-business-in-germany
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