Case Study on "Hummer the Consumer Version"

Case Study 12 pages (3248 words) Sources: 3

[EXCERPT] . . . .

Hummer

The consumer version of the Hummer has been one of the strongest stories in the automotive world in the 2000s. The original consumer Hummer may not have sold well, but its visibility far outstripped its sales, a direct result of celebrity ownership and the ostentatious nature of the vehicle. The strong buildup of brand equity led to the success launch of the H2, a more consumer-friendly variant. This was followed by the arrival of the H3. However, in recent years, sales of Hummer products have slumped. Part of the sales slump might be attributed to the honeymoon wearing off. The vehicles are not viewed as practical, and most owners have at least two other vehicles to fill their automotive needs. Additionally, the entire SUV category has suffered shifting social trends and the impacts of higher fuel prices and signs of long-term instability of fuel supply.

General Motors, owner of the Hummer brand, is faced with the prospect of reversing the recent downward trend in Hummer sales. The company realizes that the Hummer has tremendous brand equity and high visibility among consumers. Therefore, the company is working on a strategy to improve sales in North America. GM needs to determine the best way to market the Hummer for the current environment. There is little evidence that the promotional tactics have been ineffective. Rather, it appears that the product no longer matches with the needs today's consumers.

There is reason to believe that Hummer's target market has not shifted its decision-making criteria, however, given the vast gap between the Hummer's target market and the current trends in the automotive industry.

As a result, the problem facing GM with respect to marketing the Hummer in Canada is the product itself. The value proposition of the Hummer has limited its appeal beyond a narrow target market. Yet, there is still substantial room within the SUV and light truck segments for the Hummer to grow. Hummer's brand equity is strong, but the company needs to find ways to adapt the product to meet with the demands of members of the target market who have thus far spurned the Hummer. GM must adapt the product to give it a wider potential audience, if the company is to grow Hummer sales in the coming years.

Part II. Objectives

General Motors must develop a marketing plan to increase the sales of the Hummer. They must adapt the product to meet today's market conditions. This can be done over both the long-term and short-term. Short-term objectives will be for the next two years; long-term will be for the 2-5-year period.

A. Short-Term

Move sales beyond the early adopters and into the early majority group

Identify product improvements that would allow the Hummer to appeal to the later majority

Identify low-cost improvements that could provide a short-term improvement to the Hummer's value proposition

Identify potential new market segments

Defend the Hummer's premium reputation

B. Long-Term

Develop the next generation Hummer

Move into late majority stage of adoption

Take the Hummer to overseas markets

Exploit all potential niches

Part III: Situational Analysis

A. SWOT

Strengths

Strong market share for SUVs and light trucks. Canada is the world's second-largest SUV market by volume and has one of the highest market shares in the world. Plus, when light trucks are added, Canada has a very strong market.

Strong brand equity.

Not only is the Hummer name instantly recognizable, but the vehicle is, too. Among the target market, the Hummer name has a positive association.

Strong distribution through GM network. Hummers are available nationwide. Thus, capacity exists in the distribution network to take the Hummer to the mass market.

Sturdy vehicle. The Hummer's design has many strengths that can be leveraged for marketing purposes.

Status appeal. The Hummer's value as a status symbol has not been diminished significantly as a result of recent environmental changes.

Weaknesses

Customer feedback indicates that the Hummer lacks the comfort of competing vehicles.

The Hummer's fuel economy is terrible; and GM has hesitated to make improvements even though it has the ability to do so.

There is circumstantial evidence to support that the Hummer is overpriced relative to competitors

The Hummer's marketing to this point has not been well-segmented, leaving significant potential market share on the shelf

Both Hummer models are essentially niche vehicles, and the market still sees them this way

The H3 is still in the early adoption phase

Opportunities

Move H3 into early majority stage of adoption.

Find alternate uses, to better compete with light trucks. SUVs represent 19.16% of the Canadian new vehicle market; light trucks in total represent 43.45%, meaning that SUVs have significant growth potential if they can cross-over in terms of customer base.

Make product improvements to better appeal to the demands of today's consumers. This is especially important for the H3, which was designed as a mass market product (Peters, 2005) but has yet to attain such market penetration.

Improve fuel efficiency and use that as a competitive advantage over other SUVs. The H3 is competitive with respect to fuel efficiency and emissions (FuelEfficiency.gov, 2009). If GM added technology it already has to improve fuel efficiency, this could be a point of promotion.

Given the fact that it is a niche vehicle for most of its owners, and leverage its stability to promote it as a winter vehicle of choice.

Threats

Social trends. Not only are hybrids becoming more popular, but SUVs and the Hummer in particular have become a lightning rod for environmental activists. This hurts sales and can damage the firm's reputation, causing long-term harm.

The economy. For its current market, the Hummer is a luxury vehicle, a status symbol. This market typically owns other vehicles; therefore the Hummer is a relatively unnecessary item, which could lead to steep sales declines in the event of economic downturn.

Market saturation. The Hummer is at present a niche vehicle. If the market becomes saturated, sales will decline until existing owners need new Hummers.

Competition. The SUV segment is highly competitive in Canada, with dozens of different vehicles on the market. Competition is based on price, promotion and product. Increasing competition means that the Hummer must defend its market position on all of these fronts.

Fuel prices. The Hummer, having the perception of terrible gas mileage, is especially susceptible to increases in gas prices. When gas prices rise, Hummer sales decline. Given that the world is past peak oil, price increases are more likely than decreases going forward.

Environmental Factors

Social. The current social trend is towards more environmentally friendly vehicles. Hybrids and E85 capable vehicles are being developed by the major manufacturers to meet this demand, even within the SUV field. SUVs in general and the Hummer in particular are perceived as being unfashionable by a large segment of the market. This has in turn begun to marginalize the Hummer, just when GM had begun to take the H3 to the mass market. Hummers, which were the epitome of cool when launched, are now the epitome of uncool for much of today's automobile market. While this trend has yet to reach the vehicle's existing market, it has reached the vehicle's potential future market, to detrimental effect.

Economic. The Canadian economy is teetering on the brink of recession. Other developed markets have entered recession. While the Canadian market is well-structured to avoid the worst of recession, discretionary spending can be expected to decline. The current market for Hummer vehicles is middle-aged, male and white. They own other vehicles. The Hummer for them is less a necessity than a status vehicle. Thus, Hummer sales can be expected to suffer in the current economic climate. Already Hummer sales have slumped to the point where GM is considering selling the unit (Bensinger, 2008).

Technological. Several technological shifts are at work in Hummer's operating environment. Many competitors now offer E85 capabilities, allowing consumers to use E85 ethanol fuel. Some smaller SUVs are now available as hybrids, such as the Cadillac Escalade and the Toyota Highlander. The Hummer, by contrast, is almost gleefully anachronistic in its lack of adoption of modern fuel efficiency and comfort technology. In this respect, the Hummer has taken a similar approach to technology as Harley-Davidson. However, this tactic represents a significant risk for Hummer, since it effectively condemns them to their niche market at a time when they are trying to take the H3 to the mass market.

Regulatory. Under normal circumstances, the regulatory environment has little to affect competition in the automobile industry. The products of all firms are sufficiently similar that few are exempted from the impact of regulatory shifts. There is a real risk, however, that Hummer may be subjected to adverse legislation at some point in the future. There is the potential, for example, for some jurisdictions to impose fuel economy limits on vehicles, which could adversely affect the Hummer.

Competition. The competitive environment for SUVs is characterized as unfavourable. There is high intensity of competition. Firms are subject to high investment costs and high exit barriers.… READ MORE

How to Reference "Hummer the Consumer Version" Case Study in a Bibliography

Related Papers:

Sweet Grass Cheese's Development and Growth Term Paper

Sweet Grass cheese's development and growth over the years, focusing on planned and unplanned occurrences that grew their business. In addition, it discusses challenges and opportunities that they, and other… read more

Term Paper 4 pages (1139 words) Sources: 1+ Topic: Nutrition / Diet / Eating

---

Morals and Ethics Research Proposal

Ethical Issues in Business and Government Regulation

What do you think of this proposal and what ethical theory would support your position?

In principle, the proposal makes sense for several… read more

Research Proposal 3 pages (1016 words) Sources: 1 Topic: Energy / Power

---

General Motors Organizational Changes Term Paper

General Motors

Organizational change

Changes at General Motors: The New GM

Changes at General Motors: The New GM

'as GM goes, so goes the nation.' This famous statement by the… read more

Term Paper 8 pages (2545 words) Sources: 4 Topic: Transportation / Mass Transit

---

Manufacturing Process of a Bicycle Term Paper

Manufacturing Process of a Bicycle

Manufacturing Process of the Bicycle

In the past few decades, emerging new technologies have threatened the existence of the traditional bicycle. However, even with such… read more

Term Paper 10 pages (2680 words) Sources: 7 Style: APA Topic: Transportation / Mass Transit

---

View 100+ more related papers  >>