Market Conditions in London and Sydney for SEAT's

Introduction

International strategic planning is mandatory for the organisation to expand their services and gain high competitive advantage. The aim of the study is to analyse the market condition of London and Sydney where SEAT aims at expand their business through new product launch. The study helps to develop comparative analysis two cities, London and Sydney as well as conduct five forces analysis for understanding the competitive market condition for the organisation to expand their operations. The Value chain analysis of organisation to support market entry will be developed in order to identify different modes of entry where the company would be able to establish the business innovatively.

Organisational background

SEAT, S.A. is a Spanish car manufacturer, which sells its vehicles under the SEAT and Cupra brands. The company is successful to expand their operations across Europe, Middle East, Africa, Latin America (except Brazil and Argentina) and Southeast Asia (except Malaysia, Brunei and Indonesia). The products of the company are automobile, electric vehicles and automotive plants and the firm is efficient to generate revenue more than €8784 million in the last year. The net income of the company in 2020 was €194.2 million. There are more than 14751 employees, who are efficient to manage the production and operations at SEAT. The firm has been a wholly-owned subsidiary of Volkswagen Group since 1986.for repositioning of the brand, SEAT has identified ‘compact urban mobility’ which is mainly a short commutes less than 10 kilometres within the city environment, using a small vehicle (SEAT, 2021a).

It is considered as a core area for strategic development, where the firm unveiled its ‘Minimό’ concept vehicle at the 2019 Mobile World Congress. The vision of the organisation is become ‘compact urban mobility’ of tomorrow. Integrating the fields of electrification, connectivity and shared mobility the ‘Minimό’ is a 2- passenger quadricycle for business purpose with cars sharing facilities. Due to global pandemic era, the company delayed in launching this new product in the market. The organisation targets two cities to launch the product for successful rebranding and the target cities are London and Sydney (SEAT, 2021b).

Comparative evaluation of target markets

The company SEAT targets to launch a new product named ‘Minimό’ which is a mainly a two seated passenger car utilised for business to customers with SEAT’s vision of the ‘compact urban mobility’ for tomorrow. The electric car is designed creatively with latest technological innovation, and the target cities of the brand would be London and Sydney.

The public transport at London are Commuter rail, light rail including metro (tube) and tram, bus, ferry, bike and monthly public transport is about US$190. GDP per capita in the city was US$60,993 (£50,066) (2018) and it has been decreased in the recent era of COVID 19. London is considered as global leader in terms of vision and strategy investment opportunities and innovation. It is also a good performer in the regulatory environment by developing environmental sustainability initiatives. The public transport density is strong along with maintaining accessibility, customer’s satisfaction, transport affordability and air quality. London is one of the world’s most advanced ticketing systems where contactless payments and fare-capping are available across the transport network and wider areas. New technology is being rolled out to improve efficiency and reliability, where contactless though interconnected and integrated system has been develop in the city (Deloitte, 2020a). on the other hand, key mobility options at Sydney are Commuter rail, light rail including metro and tram, bus, ferry and GDP per capita was US$57,000 (A$87,750) in 2020. There is 35% public transport in London and in Sydney it is 27%. Strong regulatory support from government authorities is effective to make evidence-based decisions and improve public transport in Sydney (Deloitte, 2020b). As per the above mentioned mobility score, London is most attractive destination for the company to launch their new product and create good customers base in the market as the demand of the customers for public transport as well as per capital income is higher as compared to the city Sydney. It would be beneficial for SEAT Corporation to launch new car ‘Minimό’ and gain high competitive advantage in near future by expanding their operations and providing innovative services in the automotive industry and transportation system.

Five forces analysis of competition in chosen market

Porter's five forces analysis is effective for conducting competitive analysis, where the market condition and existing competitors can be identified. The company operates in the automotive industry across the international markets and it is beneficial to conduct five forces analysis in order to understand the market forces and the recent market condition to operation their operations. As per the five forces analysis, the forces are competitive rivalry among the firms, barriers to entry in the market, threat of substitute products, as well as the bargaining power of the customers and the bargaining power of the suppliers, which would be analysed further in case of automotive industry of the target city London, UK.

Figure 2: Porter's five forces analysis

Competitive rivalry among the firms

The competitive rivalry is strong in the market, where the company SEAT will face intense competition in expanding their services in the target market. There are efficient brands in the automotive industry, where they are successful to gain good competitive companies with their quality products and services. The top competitors include Isuzu, Stellantis, Toyota Motor Corporation, Daimler, Ford Motor, PSA Group, Hyundai Motor, BMW Group, Renault, General Motors and Volvo Group., which are operating across the global automotive industry. It is difficult for the firm SEAT Corporation to launch the new product in the target city London, in the recent market condition due to existing competitive brands.

Threats of new entrants

There is threat of new entrants in the market of London, as the city is considered as the most advanced city in terms of technology and social development. The other competitive firms can launch new products at lower price in order to sustain in the market. Hence, there are barriers to entry in the market with the new product range for SEAT. Time and cost of entry must be considered as the cost of launching new product is high and the entrepreneurs needs tome to enter into the city with new product range; it becomes difficult for the company to expand their business smoothly. Moreover, the technological advancement along with the knowledge and skill set of the customers is good, where they access the latest information, identify the features of the new car and compare and contrast the available products in the automotive industry before making purchase decision (Heinecke, 2018). Without product differentiation and cost advantage, it becomes difficult for SEAT to expand their services in the target city with a new product range. Without the cost leadership style, it is not possible for SEAT to gain good market share after launching the new product and the brand must follow all the government policies for setting up the plant successfully. Without having access of the distribution network at London, it is also difficult for the firm to compete with other firms and thus there is threat of new entrants in the market though the company has good brand image in the global automotive industry.

Threat of substitute products

The threat of substitute products is moderate in expanding the brand operations in London with new product ranges there is increasing numbers of competitive brand in London as well as the availability of the substitute products in the country further raise the threat of the substitute products. The price of the two wheeler cars is increasing over the period of time, where the new product launch by SEAT can gain good market share in London. It is a successful product for expanding their operations in the target city. The willingness of the buyers must be understood before launching the news product (Heinecke, 2018). The competitive companies are also efficient to provide different models of automotive cars for which the threat of substitute products is moderate for the company SEAT (SEAT, 2021c).

Bargaining power of the customers

The bargaining power of the customers is low, as the company SEAT is efficient to create good brand image and provide the best quality products and services to the customers. The switching cost of the customers is low, as the brand SEAT is successful to design the new products with advanced technology and maintaining its quality and other facilities. The new car ‘Minimό’ is a two passenger quadricycle primarily intended for business-to-consumer car sharing providers with smaller ecological footprint (Kim, Marin and Dennerlein, 2018). Zero emission and creative design of the car will attract the customers and enhance the sales volume for increasing business to customers to provide car sharing services to the customers. Hence, the customers have low power to bargain due to quality products and efficient technology to manage the cars with green environmental footprint.

Bargaining power of the suppliers

The supplier’s power to bargain is also low, as SEAT is successful to gain high competitive advantage in the global automotive industry, it is also a trustworthy brand, on which the suppliers can rely and work efficiently for gaining high return on their investment. Good supply chain and distribution management at SEAT further lowers the bargaining power of the suppliers in near future.

Value chain analysis of organisation to support market entry

Porter's Value chain analysis is effective for analysing the SEAT’s internal value-adding activities will be most relevant in supporting SEAT to launch the ‘Minimό’ into your chosen city. It is beneficial to analyse the internal strategic planning of SEAT in order to identify he business tactics to enter into new market London, in order to run their international operations through product differentiation strategy. As per the value chain analysis, the support activities of the firm are firm infrastructure, human resource management, technological advancement and procurement management (Tart, Wells and Beccaria, 2019). On the other hand, the primary activities of the firm are inbound and outbound logistics, operations, marketing and sales as well as the services that are provided by the firm to the end users.

Figure 3: Porter's Value chain analysis

The firm infrastructure and operations are the major internal tactics to launch a new product in the target city. SEAT targets London to launch the new product ‘Minimό’ which has been delayed due to be launched due to such pandemic era across the globe. The production tactics and technological advancement are the major success factors for SEAT Corporation to manage their operations and retain the customers for the new product range. ‘Minimό’ is the new product with advanced technology for car sharing facilities and running the business to customer’s services. It has smaller ecological footprint (3.1 square metres) than a normal car (7.2 square metres) while providing safe, agile travel and easy parking at any small space. Hereby, the design and latest technology are effective at SEAT Corporation to launch this innovative product in the target city. Realising zero emission due to its electric powertrain as well as recuing the operational cost of car sharing providers by 50% is other advantages of SEAT to launch the product in London (Simoudis, 2017). The company also provides convenient and smooth digital user experience for users based on hyper connectivity with built-in 5-G technology and hence service innovation is also another strategic planning of the company to successfully launch the new product for expanding their services in the target city London. Hence, the company focuses on technical innovation and service creativity to serve the customers successfully in the target cities (SEAT, 2021c).

As per the Porter's Value chain analysis, the major strategies of the firm are providing the best quality products and services innovatively as well as maintaining the production and manufacturing system. The company is also successful to invest in marketing and sales to run their operations while launching the new product in the target city. On the other hand, SEAT Corporation is able to manage their human resource, as the employees are the major stakeholders to contribute positively in running the organisational operations (Stanton et al., 2020). The internal infrastructure of the company is strong along with financial stability, which further influences the brand to launch this innovative product and gain high competitive advantage. A hyper-connected auto assembly line and Digitizing production processes are latest invention of the brand in order to manage the integrated system at the production sites to manufacture the cars and monitor the whole process efficiently. Integrated system of supply chain control and digital database management system are also critical success factors for turning data sources into data flows. A multi-phase project along with agile technology further develops good strategic planning to manufacture the cars successfully and provide the best quality automotive product to the customers (SEAT, 2021d).

Modes of entry evaluation

SEAT is producing the ‘Minimό’ to primarily sell directly to business-to-consumer car sharing providers rather than to end users and for this it is essential to choose the effective modes of entry into the target city in order to launch the new product successfully. direct export is one of the effective way to enter into new city London, where the major advantages of exporting the products directly are such as low entry cost, moderate financial risk and the agents overcomes the difficulties of the city successfully (Kozlovskiy and Aydarov, 2017). The foreign distributor’s network must be developed efficiently which is also beneficial for having relatively low staffing requirement and lack of marketing costs. Representative office must be established at the target city London, in order to increase brand visibility and physically resent the cars in the market. The major advantages of direct export through store expansion are physical presence on the foreign market, direct contact with the foreign customers and the permanent possibility to respond to the foreign markets signals. Licensing is also important for the company as it is the subsidiary firm of Volkswagen Group. Through licensing, it would be possible for the organisation SEAT Corporation to manage their operations in London and launch the new product successfully. Establishment of the store at London is a good idea for SEAT Corporation to manage direct export and improve physical evidence of the product in the market, where the customers can come and see the products at the store. For direct exploring, the company must strengthen the distribution network in London in order to manage the transport system and launch the new product successfully by maintaining its availability in the market (Krzywdzinski, 2017). Direct export though store establishment and licensing are hereby beneficial for the company and it is considered as good mode of market entry to launch the new product. SEAT must focus on direct export by strengthening their distribution network so that the international transact6ions can be conducted smoothly. Additionally there is stable political environment, and structure business laws and legal compliance, where SEAT can have the guidelines to manage their operations ethically and contribute positively in the target city (SEAT, 2021e).

Apart from this, Greenfield investment is one of the effective ways to enter into the new target market. Greenfield investment is a type of foreign direct investment (FDI) where a parent company creates a subsidiary in a different country for building its operations from the ground up. SEAT Corporation’s parent company is Volkswagen Group, and it is beneficial for the firm to focus on Greenfield investment in order to establish a production site at London with the help of the Volkswagen group (Davydovs’kyi et al., 2019). The joint investment would be advantageous to develop the manufacturing unit of the new product. In practical terms, it means that a company focuses on establishing or expanding a manufacturing plant, service functions, extraction operation or building a new physical construction to be included as a Greenfield FDI project. It would be successful brand in London if the home production site can be established in the city. Apart from the direct exporting, the Greenfield investment would be the best option for long run operations of the company. In order to enter into London, firstly, direct exporting would be the best more of entry through which the company would be able to export the manufactured car to the city and launch it for attracting the customers to have access to the business to customer’s car sharing services. After successful launching of the products in London, it would be great idea to focus on Greenfield investment where the organisation is able to invest a lump sum amount for establishing the production sites. After analysing the market condition and demand of the clients for making effective purchase decisions for the new product, it would be beneficial for the brand to expand their production and operation in the target city (SEAT, 2021e).

Creating shared value evaluation

Creating shared value (CSV) is the new business strategic planning in the recent era of globalisation, where the companies are trying to expand their services and running their operations sustainably. It is the role of the business leader and managers to design the product portfolio and develop good innovative tactics to create values for the stakeholders. Managing stakeholder’s values leads to retaining long run stakeholders where the company is able to develop trust and loyalty among the stakeholders for running their business operations successfully. Creating shared value is possible through managing all the stakeholders starting from internal stakeholders to the brand external stakeholders. The internal stakeholders of the company are employees, managers, and leaders. The external stakeholders are suppliers, distributions, government and customers as well as the shareholders, who are also playing an important role to run their operations sustainably (Pavlínek et al., 2017). The company SEAT Corporation is successful to manage their stakeholders by providing their high return on their investment and it is considered as values creation for the stakeholders, engaged with the business. For creating shared value, it is mandatory for the company to be profitable so that the corporate team of the firm can provide high return on the investment of the suppliers, shareholders and others. Company commitment must be met and the stakeholders are necessary to be paid with high return. Without profitability, the brand cannot meet the stakeholder’s requirement and thus the company must be economically successful to ensure financial stability and provide high return to all the stakeholders (SEAT, 2021e).

Apart from profit maximisation, it is also essential for the firm to create values for the social communities. Addressing the societal needs and challenges in business model, is essential, for further investment. SEAT is efficient to invest on social developmental projects to manage business sustainability. Additionally, the company tries to run their business operations sustainably by protecting natural resources and promoting zero carbon emission. It is a great opportunity for the brand to create shared value for all the social communities by providing safe and cleaner environment to stay. SEAT aims at providing zero carbon cars to the customers and thus electric cars are developed and manufactured around the international market to reduce the issue of air pollution (Pavlínek, 2017). Moreover, the new cars have a considerably smaller ecological footprint (3.1 square metres) than a normal car (7.2 square metres), while it is also successful in providing safe, agile travel and easy parking. The technical innovation and creativity of Seat Corporation further create values for the stakeholders, where the stakeholders can get the best quality and innovative cars with latest technology. Hence, the organisation is successful to manage their operations innovatively and choose sustainable business model for ensuring creation of shared value. gaining competitive advantage with innovation and invention of new products in the market is also another tactics of ensuring creation of shared values and in such context, SEAT would be able to manage their operations and provide the best quality car with zero carbon emissions. The company mainly aims at providing electric cars so that pollution can be reduced and air quality can be improved in near future (Saidani et al., 2018). Additionally, managing good corporate relationship with trust and loyalty among the stakeholders is also effective for the firm to create values for the investors and shareholders of SEAT. Additionally, the company also aims at creating values for the customers, where this product is in high quality and the clients can purchase it at affordable price for enhancing the mobility functions in London (SEAT, 2021f).

Conclusion

It can be concluded that, the company SEAT Corporation is successful to run their production and operations across the international markets and it is going to launch a new product name ‘Minimό’, which is a two passenger quadricycle primarily intended for business-to-consumer car sharing providers. It is an innovative idea to launch creative car in the market for managing the clients and providing zero carbon car in the market. The contribution towards green environmental footprint is appreciable at SEAT Corporation, where the CEO and managers are trying to protect natural resources and promote environmental safety to stay in pollution free environment. As per the comparative analysis of the two target cities, London and Sydney, the mobility score is higher in London and it is considered as most attractive city in expanding the operations of SEAT and launches the new product ‘Minimό’. It would be great opportunity for SEAT to launch the product and create good customers base for long run leading to profit maximisation and sales enhancement. As per the five forces analysis, the market is high competitive along with threat of substitute products and new entrant, but the brand is successful in designing the two passenger car innovatively with latest technology. The manufacturing process is also upgraded with good IT infrastructure and digitalises system which further influence the company to launch this new product in London and gain high competitive advantage by shared value creation. SEAT would be able to create shared values by profit maximisation, providing innovative cars with smaller ecological footprint releasing zero emissions due to its all-electric powertrain and investing in social developmental projects.

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