Luxury Segment Competitive Analysis
Disclaimer: The material contained in this presentation is purely
demonstrative and is not accurately representative of the
relevant companies’ actual positions.
Table of Contents
Summary
Overview
Key Factors
Competitive Analysis
Summary
Cadillac’s profit margins are lower than luxury segment industry
leaders’ due to low price, high material cost, and low volume
These can be combated with building stronger brand recognition
and sharing components across brands and platforms
Proposal: Implement architecture sharing between Chevy/Buick
and Cadillac; deploy marketing scheme to strengthen brand
Overview
Cadillac’s profit margins are lower than luxury segment industry
leaders’ due to three key factors
• Sales price
• Material cost
• Sales volume
These factors can be attributed to lack of luxury brand strength
and cost creep due to material exclusivity.
Key Factors: Sales Price
Average effective sales price decreased 15% over last 20 years
• Decrease in demand for Cadillac vehicles, especially following market
crashes
• Significant increase in incentives and discounts to clear lots
Decrease in sales price due to lack of brand strength and
recognition in the luxury segment
Solution: implement new marketing strategy designed to display
Cadillac as the premium luxury brand
Key Factors: Material Cost
Average material cost increased 10% over last 20 years
• Lack of shared architectures and materials across brands
• Cost creep due to reluctance to cut costs
Increase in material cost due to lack of parts sharing and cost
creep
Solution: extend Chevy architectures to Cadillac brand
Key Factors: Sales Volume
Average sales volume stifled growth (5%) over last 20 years
• Low dealer inventory turnover for Cadillacs
• Leads to lower return on tooling capital
Decrease in sales volume due to lack of brand strength
Solution: implement new marketing strategy
Competitive Analysis: Audi
Audi has highest margins in luxury segment
• Extremely high level of architecture and material sharing across brands
• Highest segment volume (low average tooling cost)
• Strong brand image across all developed markets
Takeaway: Audi reuses many parts across platforms and can
maintain its brand image as being a premium luxury brand
Competitive Analysis: BMW
BMW maintains margins over time with low investment
• BMW redesigns utilize few new or changing parts
• High segment volume
• Strong brand image across all developed markets
Takeaway: BMW redesigns change few parts, but historical brand
strength inflates sales volume
Competitive Analysis: Mercedes
Mercedes has consistent redesign but utilizes cheap materials
• High level of parts sharing across platforms
• Very low material costs due to sharing and quality of materials
• Arguably strongest brand strength in luxury segment
Takeaway: Mercedes continues to have segment’s lowest
material costs which inflates margins
Competitive Analysis: Lexus
Lexus is available in widest array of markets with solid margins
• Lexus sells vehicles across both developed and developing markets
• Popular for interior and exterior design
• Strong brand image
Takeaway: High market penetration and intelligent design can
boost brand image and sales volume
Proposal: Architecture Sharing
Sharing architectures with Chevy/Buick
• Can strategically target components to be shared based on user
visibility and contact
• Decrease Cadillac tooling cost by 35%
• Decrease average material cost by 6%
Impact: 8% increase in Cadillac profitability
Proposal: Marketing Tactics
Reintroduce Cadillac as high-end premium luxury brand
• Targeted advertisement using fashion and arts industry
• Move brand headquarters to SoHo, NYC for cultural shift
• Eliminate incentives and eliminate fleet and rental volumes
Impact: Increase effective sales price by 17%
Q&A