Geely's market entry strategy for Australia's automobile industry

Geely Car Entry into AU Market

Entry Strategy to Australia's Automobile Market

Demographic/Product Market

Australia's automobile market is among the most developed in the world and would make an ideal market for Geely to target given the relative proximity from the company's headquarters in Hangzhou and Australia. The company moved its headquarters there in 2003 to strategically position for international exports (Jiacai, 2002). However, there are many regulations that exist in Australia that are not present in the Chinese market that Geely will have to adapt to. Australian Design Rules (ADRs) are national standards for vehicle safety, anti-theft and emissions (Department of Infrastructure and Transport, 2012). It's recommended that they pursue a low cost entrant strategy in the urban markets.

Positioning and Supporting Industries

However, once this obstacle is overcome, Geely will have a multitude of possibilities of positioning itself in the Australian market. The company could attempt to institute a big bang approach in which it tries to enter the entire market at once a position itself as a major player quickly or it could pick a single geographic market and enter the market slowly; as well as any combination in between. However, given the fact that the company will likely have to redesign some of its manufacturing capabilities to be compliant in the Australian market, it is reasonable to suspect that it would be more cost effective to try to reach some level of quantities of scale in their Australian offering.

Therefore it is recommended that Geely try to build the brand very quickly in the entire Australian markets or at least in some of the major automotive markets in Australia such as in the urban areas. Also given the fact that the company will have to redesign the cars for this market, it is reasonable to assume bring in one model at a time would be the most reasonable approach. For example if Geely MK enters the market at the twelve thousand dollar range and has to be specially designed for this market in a low cost leader strategy, it probably would not make economic sense to create customized manufacturing lineups in the initial phases of the entrant strategy. Furthermore, this would likely also allow the company to build the brand image in the market allowing for further expansion later on.

Market Development

Production

It was determined that the most advantageous way for Geely to enter the Australian market was to manufacture one model in the low cost market segment. However this segment is the target of other Chinese automotive producers as well such as Chery (Spinks, 2011). An $11,990 drive-away price is confirmed for Australia's first Chinese passenger car produced by Geely in Australia (Dowling, 2011). The twelve thousand dollar market seems to be the benchmark to the low cost segment. It should initially distribute this model as widely as possible in the initial market entry to make the best use of quantities of scale. Furthermore, since it is not likely that one model would be sufficient to build a separate distribution channel that it would be best to form a strategic partnership with someone already established in the domestic market.

Distribution and Capacity Planning

Once the company enters through this initial strategy it must further develop its product mix, branding, distribution channels and service capabilities. The service capabilities may be one of the critical factors to the brands success. Geely will need to utilize sub-contractors to perform service operations and also warehouse facilities to stock ample replacement parts for the vehicles. Building this network should begin before the cars enter the market and reach maturity before the first three years of market entry as scheduled maintenance becomes necessary. It is likely that a few regional parts warehouses will be able to handle the entire domestic market by positioning them near urban areas and also shipping parts to the outlying territories.

When the company is ready to enter the market with a new model it should also follow a similar strategy of low cost leadership. With the advantage of Chinese manufacturing capabilities, Geely will likely to be able to provide surplus value in each price range relative to its competition. Plus in borrowing technology from Volvo, will further allow the company to develop its engineering capacity and improve its quality (Wills & Driskill, 2012). Geely has also recently introduced a new theme referred to as "Superior Quality Geely" in which it is improve its competitiveness in product design, research and development and production (Yuan, 2012).

Although it is unlikely that quality will be as high as Toyota, competing directly against other firms such as Suzuki on quality should not be an enormous challenge for the firm. It normally takes four to five years for companies like General Motors or Toyota Motor to develop new cars yet Chinese manufacturers can do so in two and half years (Shirouzu, 2012). Therefore, Geely can enter into one market niche in order to develop its distribution channels and service capabilities and then add additional models that can utilize the same channels. Geely will most likely enter with a compact or sub-compact initially but then can add the small and midsize lineups that it is already offering in other markets.