General Motors' luxury vehicle market strategy in Dubai

GMC Corporation

Over the several years, Dubai has quickly become a developing luxury car market with rapid growth. Part of the reason for this is because the country is known as a desert oasis that is attracting large amounts of tourism and foreign direct investment capital. This has caused the total number of foreigners to increase dramatically. Where, they are working in various sectors of the economy to include tourism. (Kosolowrsky, 2009) This is important, because this highlights the basic strategy that Dubai has been using to diversify their economy away from oil. Over the years, this would prove to be effective at helping to expand the economy. At which point, the luxury car market would begin to develop, with the Japanese heavily focusing on the country since the 1980's. This would create a foundation for the market in the years to come, as luxury vehicles would be purchased for domestic use and they would be imported throughout the region. (Shimbum, 1987) However, the last two years have been challenging, as demand for automobiles was impacted by: the severe implosion in consumer spending and difficult conditions in obtaining financing. Evidence of this can be seen by looking no further than examining used auto sales, as they would decline by as much as 30% at the lowest point of the recession. Since this time, luxury auto sales have been steadily increasing, as it is now eclipsing the record levels of imports seen in 2007. Where, they have increased from $11.7 billion in 2007 to $17.3 billion in the middle of 2010. During this time, the major manufacturers from around the world would increase the total number of imports to include: Japanese, American, German and South Korean producers just to name a few. ("Signs of Recovery in the Auto Sector," 2010) This is significant, because it shows how there is the possibility for General Motors to be able to significantly increase its market share for various luxury brands (that have difficulty selling in other regions). To determine if this strategy is prudent requires: examining the market conditions and how the company can be able to distinguish itself from competitors. Together, these different elements will provide the greatest insights, as to the possible benefits that the Dubai market represents for General Motors.

Analysis of Findings

The Current Market Conditions for the Dubai Luxury Auto Market

The biggest advantages for Dubai are: significant amounts of household wealth and there are no domestic manufacturing capabilities. ("UAE Auto Sales are Expected to Rise," 2009) When you put these two elements together, this means that there is the possibility for a host of major manufacturers to rapidly increase their market share. As the amount of automobile ownership and demand are increasing rapidly. Recent evidence of this can be seen, with an announcement by Rolls Royce to begin marketing the Supersport and Muslanne (these are a part of the sport utility / luxury vehicle program that the company offers). At the same time Rolls Royce announced that they were opening a new show room and were creating a parts / service center for Dubai. Commenting about what was taking place Chris Buxton (the Regional Director of Bentley Motors for Middle East) said, "The UAE saw a slight downturn and closed at around 140 units compared to 219 in 2008. We believe the market will improve and in conjunction with the launch of Supersports and Mulsanne we hope to grow our business in 2010. The Continental Flying Spur and Flying Spur Speed account for over 50 per cent of Bentley sales across the region and as such gain the largest market share in the sectors we compete in." (Basit, 2010) This is significant, because it shows how a host of luxury automobile manufacturers are aggressively targeting the Dubai market. As a result, this is highlighting how GM has the opportunity to significantly increase sales of these brands, by focusing on Dubai.

One of the reasons why the Dubai auto market has become increasingly popular is because: they have a tariff of 5% on all the value of all vehicles being imported. ("Destination Rate Tariff," 2009) at the same time, the government has taken steps to increase the used car market through the establishment of the Dubai Municipality Used Car Complex. This is where the government is allowing over 130 different automobile dealers to sell a variety of used cars at a discount. (Butler, 2008) the creation of this market is important, because it shows how the country's secondary car market is quickly developing. Where, a host of dealers will often go to Dubai to find cheaper prices from some of the top manufacturers. When you compare this with the increase in demand for luxury cars, this highlights how these two factors would create large import / export markets and it would build the domestic sector. These elements are important, because they are highlighting how GM can be able to take advantage of these changes, by aggressively marketing different luxury brands in the country.

How can GM be able to Distinguish itself from Competitors

GM is currently sitting at a crossroads, where the recent bankruptcy would reduce the legacy and labor costs. At the same time, it still has its name recognition and access to over 32 different markets around the world. In the Middle East, the various brands have been becoming increasingly popular, with sales rising by 60% before the recent economic contraction. ("Automotive Industry Analysis," 2004) This is important, because it shows how GM can be able to significantly increase market share, despite the various financial challenges that it has faced in the past.

At the same time, the focus on diversifying into other sectors to include: finance, trade, retail, tourism and health care are creating a shift in the economy. This is helping to make Dubai a crossroads between the Far East and Europe. As a result, this is highlighting how the economy is presenting a number of different opportunities for large foreign investors. ("From Camels to Cadillacs," 2004) This will have a direct impact upon luxury auto sales, as these elements and the high levels of income inside the country will cause demand to remain strong well into the future.

Recommendations

In order for GM to be able to have a major impact in Dubai, the company needs to redefine itself. This means that they have to be able to use their image of new kind of auto manufacturer, to create a unique brand name. To do this, the company would have to first understand what consumers were looking for by examining various demographics. Once this information is obtained, it could be used to help GM redefine its image. For example, if consumers are looking for a luxury vehicle that has quality and comfort. GM could marker their different luxury brands to consumers, by emphasizing these two factors. At the same time, they would need to provide support for their various products with a service / parts center that is similar to what Rolls Royce has created. The reason why, is because the company needs to show that after the sale, they will provide the necessary support and parts for any of their vehicles.

When you take these recommendations and examine them with the various factors that were discussed earlier. It is clear that they can help GM be able to make a significant impact in the luxury auto market for Dubai. The reason why is because, the company can be able to redefine itself in these markets (if they find out what consumers want and address those needs). Then, providing added service (before and after the sale) will help the company be able to show that they are different from everyone else. Once this takes place, it will help GM to effectively compete head to head against some of the largest auto manufacturers in the world (by offering better quality and service). As the Dubai market is quickly becoming the place for luxury automobiles in the Middle East.

Resources

Automotive Industry Analysis. (2004). Academic Mind. Retrieved from: http://www.academicmind.com/unpublishedpapers/business/management/2004-11-000aaa-automotive-industry-analysis.html

Destination Rate Tariff. (2009). Global Relocations. Retrieved from: http://www.globalrelocations.com/downloads/Destination%20Rate%20Tariff%20Aug%202009.pdf

From Camels to Cadillacs. (2004). The Business Times of Singapore.