International Marketing Plan

7/13/2019 International Marketing Plan

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International School of

Management

An International Marketing Plan

for

The Launch of an Electric/Hybrid Car by a French

Auto Manufacturer in the United State Market

By Anteneh Getachew

June 2014


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Table of Contents

1. Introduction........................................................................................................................... 1

2. Historical Background of Green Technology..................................................................... 4

3. The Global Development of Electric / Hybrid Car Manufacturer................................... 5

3.1 Global marketing and sales situation of Electric/Hybrid cars............................................ 6

3.2 French Electric / Hybrid Car Manufacturers...................................................................... 7

4. Motives and Ways of Internationalization.......................................................................... 9

4.1 Pro-active Motives............................................................................................................. 10

4.2 Reactive Motives................................................................................................................ 12

4.3 Critical barriers................................................................................................................. 13

5. Company's International Competitiveness....................................................................... 14

5.1 Macro level........................................................................................................................ 14

5.2 Meso level analysis............................................................................................................ 17

5.3 Micro level......................................................................................................................... 21

6. Political and Economic Barriers to export of electric/hybrid cars to the U.S............... 246.1 Political Barriers............................................................................................................... 24

6.2 Economic Barriers............................................................................................................. 25

7. The Influence of Culture on the International Marketing Strategy............................... 27

7.1 Hofstede's Model................................................................................................................ 27

7.2 Edward Hall....................................................................................................................... 28

8. The type of market entry modes that the French car manufacturer should consider .. 30

9. International Product Life-Cycle and its implications for the electric /hybrid car....... 36

9.1 International Product Life Cycle (IPLC)........................................................................... 36

9.2 PLC Implications for the Electric/Hybrid Car Models...................................................... 43

10. Conclusions and Recommendations............................................................................... 4610.1 Conclusions........................................................................................................................ 46

10.2 Recommendations.............................................................................................................. 49

Reference..................................................................................................................................... 51

Annex-I..........................................................................................................................................54Annex-II.........................................................................................................................................55Annex-III........................................................................................................................................56AnnexIV........................................................................................................................................ 57

1. Introduction


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The automotive industry has been around for over a century and has developed vehicles that use

different technologies to power their cars that includes steamers, electrics, internal combustion

(e.g. diesel, rotaries, and turbines), fuel-cell hybrids, pure electrics, and hydrogen fuel-cell

(McGrath R. N., 2012). "Since the early 1900s, electric-powered vehicles have stayed in an

uncertain state at the fringe of legitimacy when compared with the dominant vehicle design of

gasoline power. Due to urban air pollution, the California Air Resources Board (CARB)

mandated two percents of the cars that manufacturers sell in California must be electric vehicles

starting in 1998" (Christensen, The innovators dilemma: When new technologies cause great

firms to fail , 1997, p. 159). Performance improvements demanded by the market, and the

performance improvements supplied by the technology will create the trajectory map for electric

vehicles.

Electric Vehicles (EVs) and Hybrid Electric Vehicles (HEVs) are driven forward by an electric

motors powered by rechargeable battery packs. Electric motors can convert 75 percent of the

chemical energy from the batteries to power the wheels. The internal combustion engines (ICEs)

are less energy efficient as it can only convert 20 percent of the energy stored in gasoline

(Dolcera (website). Electric Vehicles Market., n.d.).

Electric Vehicles emit no exhaust pollutants and the power plant producing the electricity is less

pollution than gasoline vehicles. The performance benefits of electric motors provide quiet,

smooth driving, and quick acceleration than ICEs.

Due to advocacies of clean and unpolluted world environment by money interested groups and

political parties one of the pollutants like CO2 emission has been criticized all over the world.

One of the most pollutant industries is the transportation sector. Karamitsios (2013, p.6) holds

that "the transportation sector has contributed significantly to the increase of CO2 emissions


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worldwide". This is due to heavy reliance of the sector on fossil fuel technologies (Karamitsios

A. , 2013).

In order to expand the use of non pollutant alternative vehicles many governments like the U.S.

federal government has established various incentives and regulations that urge new

entrepreneurs and corporate entrepreneurs to invest in the green-technology vehicle market.

(Karamitsios A. , 2013). Emanating from the governmental regulations and incentive programs

on environmental pollution, different manufacturers started to come up with the launching of

environmentally friendly technologies such as Electric Vehicles (EVs) and Hybrid Electric

Vehicles (HEVs). This change in product development enables providing innovative cars with an

added value of gas consumption efficiency and other environmental friendly aspects.

In addition to this the car market is strongly developed internationally for the production as well

as for the marketing and selling process. According to Peter (2012) "In today's competitive

environment, developing an international marketing strategy is common and used by many

companies to open business perspective, remain competitive and fulfill customer needs across

the globe. However, implementing an international marketing strategy is a long and expensive

process, especially in a competitive market such as the car market of the United States. As per

the US Bureau of Transit Statistics (2004), the number of registered passenger vehicles in the US

is 243,023,485" (p. 1). The environmental policy and the measures to promote the energy

transition encourage the purchase and sale of electric vehicles.

According to Catero and Ghauri (as cited in Peter, 2012, p. 1), "International Marketing is the

flow of a company's good to consumers in more than one nation with the objective of profit.

International marketing allows enlarging the company's target and increase the number of


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potential customers and probable sales. Nevertheless, international marketing can be source of

success or failure if wrongly managed or implemented".

The same author asserted that " all products cannot be marketed on an international level, the

potential demand has to be effective, the product has to provide an added value for the customer

and be well marketed according to cultural, economical and many other factors" (Peter, 2012, p.

1).

This paper is about international marketing plan for the launch of an electric / hybrid Vehicles by

a French auto manufacturer in the US market. In this paper we will discuss about historical

background of green technology, and the global development of Electric / Hybrid car

manufacturer.

This paper will addresses more specifically the reactive and proactive motives for exporting

electric / hybrid vehicles, examine the companys international competitiveness at the macro,

meso and micro levels, the possible economic and political barriers that would impact the export

of cars to the United States. The paper also covers the influence of culture on the international

marketing strategy and the type of market entry modes that the French car manufacturer should

consider. In addition it describes the International Product Lifecycle (IPLC) and its implications

for the electric /hybrid car models.

2. Historical Background of Green Technology

According to Bellis (2014) green technology is the long as well as short term impact of new

inventions on the environment. This technology has the purpose of making our planet green. The

same author pointed out that energy efficiency, recycling concerns for safety and health and

renewable resources, among others are what environmentally friendly innovations in energy

technology is all about.


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"The CO2 emission has become a bigger and bigger problem around the world today. Its hard to

open a newspaper without reading about the polar ice is melting or that its getting warmer"

(Lehman, 2009, p. 6). According to the Boston Consulting Group "the causal correlation between

CO2 emissions and global warming is now widely accepted by a solid majority of the scientific

community. The significant damage caused by global warming and the intense public awareness

of this topic make the challenge of reducing CO2 emissions the major force currently driving

development of alternative concepts for automotive propulsion" (Boston Consulting Group, as

cited in Philipp & Haiss, 2010, p. 9).

An important incentive for new technologies was stipulated in 2007 by U.S. government by

enacting the Energy Independence and Security Act, formulated by the Congress, which forced

the automobile manufacturers to achieve a limit of 35 mpg by 2020 (Karamitsios A. , 2013).

The same author identified that, various programs that provide financial back-ups to car

consumers have also been devised by the U.S. government.

These incentives involve:

Loans for the promotion of battery research and other green-technology development for

vehicles.

Support for electric vehicle (EV) battery charging station implementation.

The EV purchasing by the federal government (pp. 22-23).

3. The Global Development of Electric / Hybrid Car Manufacturer

Car manufacturers have to deal with increasingly stringent norms and customers who are

increasingly demanding with respect to fuel savings. As a result, large numbers of them are now

looking into solutions that involve electrifying their vehicles. But not all manufacturers are

necessarily using the same strategies (The development of hybrid and electric vehicles, 2011).


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The market for hybrid and electric vehicles is still largely dependent on these premiums for

helping it to grow and reach a critical size. Manufacturers and other bodies involved in the sector

are well aware of this and are striving to take advantage of these tax shelters. Although the

market is very dependent on these premiums, and despite all the risks that such dependence

brings, the majority of manufacturers are counting on hybridizing their range - a practice that

was initiated by Toyota. At the same time, most manufacturers are making progress on their

electric vehicle projects (The development of hybrid and electric vehicles, 2011).

Beyond simply being a "race" to launch the first mass produced electric vehicle for the general

public, two main approach strategies for electrifying vehicles are emerging quite clearly. The

strategy favored by most manufacturers involves gradually hybridizing their range, with the

electric vehicle at the very end of the chain, as Toyota is doing. Renault, on the other hand, has

turned the electric vehicle into an area for strategic development and is already planning to

release four different electric models for the 2011- 2012 period (The development of hybrid and

electric vehicles, 2011).

3.1 Global marketing and sales situation of Electri c/Hybrid cars

The demand of global market is growing sharply over two times from 45,000 units in 2011 to

113,000 units in 2012 as indicated in Annex-I. The market share of hybrid and pure electric car

volume in 2009 and 2020 projective volume are still very small percentage in vehicles industry

as shown in Annex-II.

As explained by the France Diplomatie (n.d.) "Europe has become the second largest market for

electric vehicles behind the United States and ahead of Japan. 18,939 electric vehicles were

registered in Europe during the first half of 2013 (compared with 15,503 during the first half of


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2012), while the United States registered almost 30,000 electric cars and Japan less than 6,000"

(para. 7).

When we see the top electrified vehicles sales in the world " the Nissan Leaf dominated sales

globally and #1 in 2013. The Chevy Volt, especially thanks to strong sales in the US, was #2.

The Toyota Prius Plug-in inched out the Tesla Model for #3. And not too far behind the Model S

was #4 and the Mitsubishi Outlander Plug-in is#5. After that, sales drop off quite a bit and

Renault Zoe ranked as #6 globally" (Shahan, abb-conversations, 2014, para. 1).

The same author further ranked the top electrified vehicles sales in Europe as a whole, "the

Nissan Leaf again took #1 in 2013. However, in this region, #2 was the Renault Zoe. The

Mitsubishi Outlander Plug-in wasnt far behind at #3, followed by the Volvo V60 Plug-in and

then the Renault Kangoo ZE. But the results in specific European countries varied quite a bit"

(Shahan, abb-conversations, 2014, para. 2).

3.2 French Electric / Hybri d Car Manufacturers

France accounted for sales of 9,399 of hybrid electric vehicle units a very modest increase of

2.9% on 2008, but importantly, on a market share that fell.

According to Shahan (2014) in 2013 the Renault Zoe captured 37% of the market, the Renault

Kangoo ZE (an electric van) got another 28% and the Nissan Leaf took third place with 10%

electric vehicles market share in France. The rest three EV manufacturers Bollor Bluecar,

Renault Twizy andGoupil G3 took the 4th, 5th and 6th place respectively. Five out of these top

six models were vehicles produced in France by French companies.

As it has been explained in the above section, one of the major green technology vehicle markets

is the introduction of Electric Vehicle (EV). According to the information of France Diplomatie

"The implementation of an environmentally responsible public policy at the national and local
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level and the supply of vehicles produced by French manufacturers have enabled France to

become the largest electric vehicle market in Europe" (France Diplomatie, n.d.). Among the

Electric Vehicle manufacturers in French, Renault has played a pioneering role to achieve this

top ranking.

To look at the industrial environment of Electric and hybrid cars in France, the list of

manufacturers are concisely summarized by Shahan (2014) as follow:-

Table 1: List of electric and hybrid car manufacturers in French

No. Description Performance, number of

Seats and price in Euro

1 Renault Zoe is a good-looking, 100%-electric, super-affordable

car. Its about the same price in France, its home country, as theNissan Leaf is in the US, and just a little more than the base Leafcosts in France (18,090).

The Zoe was the 2nd-best-selling electric car in Europe in 2013next to Nissan Leaf. It is also the first best-selling car in France.Despite only being available in Europe, it was the 6th-best-selling electric car in the world in 2013 the highest-rankingcar to be available on only one continent.

Renault is the French leader of the car industry in France, with a

turnover of 38 billion and more than 3 million car sold in 2010 ,the company recently launched a new range of electric cars inFrance

Travels 210 (130 miles)

kilometers per singlecharging

Have 5 seats

Its price is 20,900

Available in Europe

2 The Renault Kangoo ZE,theRenaults electric van, is doingquite well. It was the5th-best-selling plug-in in Europe in 2013,and the10th-best in the world.Furthermore, in its home countryof France it is the second best-selling car, the Kangoo ZErepresented about 12% of all Kangoo light commercial vehiclessales.

Travels 170 kilometers(110 miles)

2-seat or 5-seat optionsversions.

Price is 20,450.

Available in Europe

3 The Renault Twizyis a cute and fun little two-seater that comes

in at a super affordable price. With just two seats, its clearly nota family car, but it is a ton of fun to drive and very adequate formost driving needs. Because of its small size, the Twizy was the10th-best-selling electric car in Europe and15th-best-sellingelectric car in the world in 2013.It is also the 5th best selling inFrance in the same year.

Travels 80 km (50 miles)

Have 2 seats

Price is7,240

Europe (& reportedly USon eBay)

4 The Citren C-Zerois produced in France but it was developed Travels 150 kilometers (93
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No. Description Performance, number of

Seats and price in Euro

in collaboration with Mitsubishi Motors Corporation and sharesthe model with the Peugeot iOn. It is the 16th best-selling car inEurope and 12th best selling in France in 2013.

miles

Have 4 seats

Price is29,600

Available in Europe5 The Bollor Bluecaris a low-price, simple electric car produced

and only available in France. It is used in the Autolibcarsharing program in Paris, but is also available to retail customers.It was the16th-best-selling electric car in Europe in 2013.

Travels

250kilometers(155 miles)4 seats

12,000 + 80/mo battery

Available in France

6 Peugeot iOn is essentially the same as the Citren C-Zero andMitsubishi i. The Peugeot iOn was the 17th-best-selling electriccar in Europe in 2013 and 11th in France.

150 kilometers (93 miles)4 seats

29,600

Available in Europe

7 The Goupil G3 is a 100%-electric utility vehicle designed forservices like garbage disposal, construction site support, leafcollection, park maintenance, etc. It is produced and primarilysold in France. The Goupil G3 came in#18 in European EV salesand the 6th in France in 2013.

120km (73 miles) Price is17,000

Available in Europe

8 TheMia Electric Miais built in France by a French company,but staff include former VW design boss Murat Gunak and ex-Bertone design chief David Wilkie. It looks like a cute and veryuseful EV for last-mile deliveries and related services. The EVcame in#20 in European EV sales in 2013.

80130 kilometers / 5081miles

Have 3 seats

Price is 12,255

Available in Europe

9 The Citren Berlingo EV is a 100%-electric version

of Citrens Berlingo vans. The electric van is available inseveral European countries. It is produced in France & is actuallyused by the French postal service.

171 kilometers (106 miles)

Have 2 seats Price is26,220

10 The Peugeot Partner EV is the same as the Citren Berlingo EV.The electric van is produced in France but is available inseveral European countries.

171 kilometers (106 miles)

Have 2 seats

Price is26,220

Source: Own construction based on(Shahan, evobsession.com/electric-cars-2014-list/, 2014)

4. Motives and Ways of Internationalization

The basic motive of firms in exporting products is to make money. However, as in most business

activities, one factor alone once in a blue moon accounts for any given action. Frequently a

combination of factors results in firms taking steps in a given direction (Hollensen, 2011).
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The launching of an electric/hybrid car by a French auto manufacturer in the US market is a

business strategy that derived from serious of proactive and reactive motives that could be

advantageous for a French car manufacturer and make the product a success abroad.

4.1 Pro-active Motives

Proactive motives represent stimuli to attempt strategy change, based on the firms interest in

exploiting unique competences (e.g. a special technological knowledge) or market possibilities

(Hollensen, 2011).

Among several proactive motives the following are the major firm's initiation to launch the

French manufactured electric car in the United States.

Profit and growth goals: -a French electric/hybrid car manufacturer should plan to earn from

the opportunity to generate profits by capturing a new market and generating additional sales that

will enhance manufacturer competitiveness both on a national and international perspective

(Peter, allfreepapers, 2012). When we look at France 2013 electric car sales, five out of the top

six electric vehicles (EV) models were vehicles produced in France by French companies. Those

manufacturers should find an alternative than the French market which is very competitive and

less opportunities.

Technology competence/unique product: - The French electric/hybrid car manufacturer can

get advantage from the technological competence and knowledge of French engineers and its

experience. There are several electric/hybrid car manufacturers in France and the advancement

of the technology due to competencies at national level will help to develop a product that is

unique in performance and efficiency that can be preferred by U.S. customers (Peter,

allfreepapers, 2012). In addition to this the French EV/HEV manufacturers will get benefit in

implementing a product and marketing diversification and this will increase the company's


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market share at global level. (Hollensen, 2011). Similarly the launch of new EV/HEVs product

to U.S. market could help French manufacturers to improve their brand image all around the

world.

Foreign market opportunities/market information: As proactive motives, the French

company needs to understand that the U.S. could be a foreign market opportunities as American

people like cars (they can drive since 16 years old), they all have cars. On top of that in the

economic and environmental context, hybrid cars could be great for this market to launch such

car (International marketing car industry, 2012). To substantiate the U.S. market of electric

vehicles as illustrated in Annex-III, in 2012, the demand of 100% electric and plug-in hybrid

electric cars grew tremendously and nearly three times volume of 2011 (2010 sales = 345; 2011

sales = 17,735; 2012 sales = 52,835; 2013 = 48, 489).

Zachary Shahan studied that the US markets massive growth in demand rate in 2013 and

identified over 30 percent of the US electric cars and plug-in hybrid sales occurred in San

Francisco and Los Angeles (Shahan, Tesla Gigafactory for Electric Car Batteries, 2013).Electric

vehicles penetrate different cities in United States as Annex-IV.

Economies of scale: French electric/hybrid car manufacturers has been identified by Peter

(2012) as successful in Europe, and their market positioning of leader in France consent to the

car manufacturers to benefit from the economy of scale to produce Electric cars intended to the

U.S. as the French supply chain is already developed and implemented.

Tax benefits: Looking the US government move for $7,500 tax credit for EV purchases and the

movement to reduce foreign oil imports resulted in increasing purchase of EVs (Aulicino,

Waratuke, Williams, & Elliott, n.d.). The market for hybrid and electric vehicles is still largely

dependent on these premiums for helping it to grow and reach a critical size. French


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Manufacturers involved in the sector will have the advantage of these tax shelters in U.S. (The

development of hybrid and electric vehicles, 2011).

4.2 Reactive Motives

Reactive motives indicate that the firm reacts to pressures or threats in its home market or in

foreign markets and adjusts passively to them by changing its activities over time (Hollensen,

2011).

Competitive pressures: - "The market opportunity of electric and hybrid cars in the US has

already been adopted by Toyota, resulting in a type of competitive pressure that French

electric/hybrid manufacturers could respond to. The Japanese car manufacturer Toyota

announced that one million cars were sold in the U.S in April 2011, eleven years after the Hybrid

model of Toyota was introduced in the U.S. With 3 million cars sold around the world, the U.S

market represents more than 30% of sales for the Toyota Prius. As a consequence of the above

example of Toyota, we can easily deduce that launching a hybrid car in the U.S is a foreign

market opportunity. Indeed, the American car market is strongly developed and many foreign car

manufacturers are already implanted. This highly developed market can be explained by the

social importance of cars, the accessibility of the driver license and the abundant and currently

renewed offer" (Peter, allfreepapers, 2012, p. 3).

Domestic market: small and saturated: -French EV/HEV manufacturers may be pushed into

exporting may be due to small home market potential in the future. For some firms, domestic

markets may be unable to sustain sufficient economies of scale and scope, and these companies

automatically include export markets as part of their market-entry strategy (Hollensen, 2011).


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The same author perspective indicate that if French EV/HEV manufacturers are producing

products for domestic market, saturation will be created and forced to develop strategy for

exporting products to overseas where the demand is expected to be high.

For Peter (2012, p. 4) the size of American car market benefit the French electric/hybrid car

manufacturers from the following experience curve effects due to the large market factors.

For instance, the size of the market will allow the French manufacturer to benefit of

economies of scale when manufacturing products. Let's assume that many states have

ordered cars, the general order quantity will be more important than an order for the

French car market. We can assume that the car piece are standardized

On the other hand, the distribution conditions (costs, availability, margin etc.) are more

advantageous in the U.S, simply because the number of car dealership is more much

more significant. The size of the market can also strongly increase the product growth

and expansion.

In addition to the aforementioned motives, to reduce the environmental impact and avoid foreign

oil dependency a billion dollars spent from 2008 to 2012 to create and implement public and

private battery plug in the area of San Francisco. In addition to this Californians are already

equipped with solar installations which generate electricity. Such initiative is a supporting

condition for launching of electric vehicles into U.S. could be good opportunity for French

companies (The development of hybrid and electric vehicles, 2011).

4.3 Cri tical barriers

One of the critical barriers that French manufacturers will face to launch EV/HEV for U.S.

market could be language barrier as it is quite hard to attract American people without strong

communication in English language. In addition the French manufacturers will need to take care


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about the American behavior, culture and how they can buy or why they are buying this car or

the other (The development of hybrid and electric vehicles, 2011).

Way of life, beliefs, and practices of human are strong attributes defining identities of the many

societies populating our universe. At the same time the unique elements that are common ground

for each society are differentiating elements, identity, about which we need to be aware of to

which we need to tailor our multi faceted engagements with each other. Luck of multi-cultural

knowledge, ignorance, and poor awareness as to the differences of culture from nation to nation

and within a nation, especially in countries like U.S. caused many multi-national companies to

develop products to fail.

Cultural background affects how consumers process advertising messages, and advertisers

recognize the purchasing power of the diverse ethnic groups in the United States. Recognizing

this explosive growth of ethnic markets in the U.S., French EV/HEV marketers should make

every effort to entice these lucrative ethnic markets and to develop the most effective marketing

strategies to appeal to ethnic consumers (Cao, 2009).

5. Company's International Competitiveness

5.1 Macro level

National strategy, success and competitiveness have a major influence on French auto

manufacturer to launch EV/HEV for the U.S. market (Peter, allfreepapers, 2012). Accordingly

French EV/HEV manufacturers national position, efficiency and competitiveness to export the

EV/HEV for U.S. market is evaluated at macro level using Porter's diamond as follow:-


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Factor Conditions: One of the key resources that French EV/HEV manufacturers possess is the

culture of innovation that put the manufacturers in a position to posses various EV/HEV firms

within the country with products which has various performance, function and efficiency.

Considering the human resource which is kind of an issue in French because employees in the

car industry are less effective as they suffer from part time employment as the economy and the

demand has been less important since 2008 crisis (Internationa marketing, 2010).

Concerning the operational facilities Peter (2012) has described the specific case of Renault Zoe

electric car company factor condition as follow: Renault's important infrastructure is available in

France and abroad, headquarters are based in Paris, and this is where important decisions are

made, Renault uses external resources and outsources its production, and the assembling and

manufacturing is made in France and European countries to keep control over the quality of

products.

Demand conditions: Among France EV/HEV theRenault Zoe was the2nd-best-selling electric

car in Europe in 2013.Despite only being available in Europe, it was the6th-best-selling electric

car in the world in 2013 the highest-ranking car to be available on only one continent, the

competition among EV/HEV manufacturing companies in the France market created home

market customer to pressure on firms to innovate high performance EV (Shahan,

evobsession.com/electric-cars-2014-list/, 2014).

In 2013, the French market for electric and hybrid vehicles represented 3.1% of the global

passenger car market in France. Compared to 2012, sales of electric vehicles (passenger cars and

light commercial vehicles) increased by 50% and sales of hybrid vehicles increased by 60%. In

total, 8,779 electric passenger cars were registered in France in 2013. Sales increased by more
http://evobsession.com/tag/renault-zoe/http://evobsession.com/europe-electrified-vehicle-sales-2013-report/http://evobsession.com/europe-electrified-vehicle-sales-2013-report/http://evobsession.com/world-electrified-vehicle-sales-2013/http://evobsession.com/world-electrified-vehicle-sales-2013/http://evobsession.com/world-electrified-vehicle-sales-2013/http://evobsession.com/world-electrified-vehicle-sales-2013/http://evobsession.com/europe-electrified-vehicle-sales-2013-report/http://evobsession.com/europe-electrified-vehicle-sales-2013-report/http://evobsession.com/tag/renault-zoe/


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than 50% compared with the 5,663 vehicles registered in 2012. Sales volumes in France were

twice as high as in Germany (3,000 cars) and Norway (2,500 cars) (France Diplomatie, n.d.).

In addition to the above advantages "public opinion is more and more concerned by sustainable

development, and particularly by the environment problem. Those concerns about sustainable

development force the French industry to improve the quality of their product and the respect of

their environment. Those improvements bring to a total improvement of their product, process

and practices which is very positive for the whole industry as it prepares to be competitive on

global level" (International marketing car industry, 2012, pp. 3-4).

In terms of electric cars, French electric/hybrid car manufacturers offering different performance

range of cars and different seat targeting all type of consumers, and offer a relatively wide range

of products. The price of the electric/hybrid cars manufacturers is affordable and its targets

environmental friendly consumers aged 20 to 60.

Related and supporting industries: French EV/HEV manufacturers have a lot of relation and

network in Europe suppliers that can produce inputs that are important for innovation and

internalization. The R&D departments of these companies enabled to produce cost effective and

good performance EV/HEV in French.

According to International marketing car industry (2012) "the French car industry has a vertical

and horizontal integration. It disposes of an important network of suppliers in all the European

Union but also a network of distributers supporting it in the European zone. Unfortunately, the

zone covered by those networks is mainly Europe and does not go that further" (p. 4).

Firm strategy, structure and rivalry: As pointed out by the International marketing car

industry (2012) "the domestic competition is pretty high between the two main French car

manufacturers; as Renault and Peugeot are two important actors on the French market.


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Considering that all the other European and Asian companies are also very present on the French

market and appreciate because of their low prices, the domestic competitiveness is important

which means that productivity and efficiency is a part of each manufacturer of the market. In this

way, the industry, and more specifically Renault is prepared to compute internationally" (p. 4).

5.2 Meso level analysis

To analyze international competitiveness of the French auto manufacturers at the meso level,

Michael Porters Five Forces Model will be used as analytical framework. For Porter (1979) the

five Forces are competitive rivalry, buyer power, supplier power, treat of entry, and treat of

substitutes.

a) Competit ive Rivalr y

According to Lehman (2009) "Since there arent thosemany EV manufactures on the market yet,

the competitive force exerted by rivals are low. This scenario can change fast. Many car

manufactures are thinking of making EVs. Even though the entry barriers are very high, there are

still car manufactures that got a lot of the same technology to manufacture electric/hybrid cars.

The big difference, and also the key to electric/hybrid cars, is the batteries and the electric

engine" (p.42).

The other challenge as predicted by Lehman (2009) is "the batteries need to be able to hold a lot

of energy as well as being recharged fast. The electric engine has been on the market for a long

time and the technology can be bought from many different manufactures. It is of course

important to get an engine with high performance and which is able to use the power as well as

possible" (p. 42).

In order to look at the competitive landscape of the electric/hybrid car industry Karamitsios

(2013) listed out the direct and indirect competitors as illustrated in the following matrix:


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Table 2 : Direct and indirect competitors

Product Major players (orupcoming)

Competitiveness

Electric Vehicle manufactures Think, GM Volt Direct

Hybrid cars Toyota Prius, Lexus, Fisker Direct

Conventional cars GM, Crystler, VW, Porsche Indirect

Source: (Karamitsios A. , 2013)

b) Buyer Power

Regarding the bargaining power of buyers Lehman (2009, p.45) summarized the situation as

follows "Even though the customers are the ones who bring the money, their bargaining power is

still low". For Lehman (2009) the bargaining power of customers will significantly increase from

where it was in the past (low bargaining power) if the electric/hybrid car industry is going to

grow in an increasing rate.

According to Peter bargaining power of buyers is the main threat of the car market. The same

author further explained that "on an international or national perspective, buyers have a large

choice of products, creating a highly competitive market. Moreover, today's customer

expectations are high in terms of technologies and modernity. The technologic evolution forces

car manufacturer to constantly come up with innovative product and solutions. End customers

have a relatively strong bargaining power as the used-car market is currently booming and

customers are budget-minded. As a result, we can observe the price of new vehicles strongly

decreasing and companies offer new financing methods adapted to the customer buying power. If

French electric/hybrid car manufacturers decides to export their products to the U.S, but to a

distributor, the bargaining power of the distributor will be high, as the distributor will take a

major risk by offering a product that is not present on the market" (p.12).


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c) Suppli er Power

One of the suppliers ofFrench EV/HEV manufacturers are Europe suppliers that can produce

inputs that are important for innovation and internalization and has a lot of relation and network

with suppliers.

The bargaining power of Suppliers is average as car manufacturers purchase in bulk and there is

long term relationship with supplier. But this scenario will change to high bargaining power of

supplier in case the supplier able to provide high technology equipment and consistently meet

order deliveries (Peter, allfreepapers, 2012).

d) Treat of Entry

For Lehman (2009) "the complementary of the electric/hybrid industry are the power industry as

well as the oil industry. The power industry has a great interest in the electric/hybrid becoming a

successthis will sell more power. On the other hand is the oil industry not that interested in this

new vehicle. This will affect one of their main sources of income" (p. 44).

The potential new entrants and their respective power as indicated by Aulicino, Waratuke,

Williams, and Elliott, (n.d.) is that new entrants with similar technologies has low power. On the

other hand new entrants with disruptive technologies have high power, these include: Large

mass-market manufacturers (Chevrolet, GM, Toyota), Luxury performance sports cars (BMW,

Porsche, Mercedes), other boutique manufacturers (Italians and Aston Martin). Besides that

French electric/hybrid car manufacturer is also facing some challenges from the currently

coming none fossil fuel technologies like hydrogen and natural gas (Hall, 2013).

The challenges mentioned above are further exacerbated by factors like strategic shift towards

gasoline electric hybrids; the promising believes for fuel cells than battery electric cars; and the

obvious short comings i.e. driving range, cost and recharging time of electric vehicles is putting


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them not to become a natural replacement for the conventional cars (Shirouzu, Kubota, &

Lienert, 2013).

e) Treat of Substi tutes

According to Lehman (2009) "The other force which is very strong is the substitute products.

Most people still choose to buy a normal car, which of cause makes the car industry the largest

competitor. It is because of the substitute products that the competitive force all together is high

and still makes the industry less attractive. Firm in the industry should at all time pay attention to

the competitive force, since it can change at all time" (p.46).

On top of the aforementioned situation the following are some of the major indications for the

increasing treat of substitutes for French electric/hybrid car manufacturers: First there is a

continues development on solar cell design and car power supply requirements like heater or air-

conditioning (Bellis, 2014). Second there is a strategic shift by automotive executives in Asia,

Europe, and North America to new alternative energy sources like hydrogen. Finally the move

by Nissan to follow its rival Toyota in changing its power generation for the next big green-tech

innovation of hydrogen to electricity and the new alliances of Toyota and BMW to develop

hydrogen powered fuel cell cars are the major indicators of aggravated treat for new technology

(Shirouzu, Kubota, & Lienert, 2013).

To substantiate the analysis of the five forces to look at the industrial environment of

electric/hybrid cars, the three types of competitors namely Immediate, Impending and invisible

competitors of French electric/hybrid car manufacturer are concisely summarized by Aulicino,

Waratuke, Williams, & Elliott (n.d.) in the following illustration:


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Table 3: Competitor Environment

Immediate Competitors BMW, Nissan Leaf, Daimler, Lexus, Audi, Fiat, Think, Aptera, Fisker, Coda, Zap , Volkswagen

and VolvoDirect competitors in EV market ToyotaHybrids successful but not completely green- Direct competitors in Hybrid car market.

SmartSuccessful - Direct competitors in Hybrid car market

Impending Ford, GM, Hyundai, Honda, Etc.Potential competitors

Invisible As EV industry grows, more competitors will enter market New startups will appear Disruptive technologies will appear

Source: (Aulicino, Waratuke, Williams, & Elliott, n.d.)

5.3 Micro level

Supplier-The French electric/hybrid car industry has a vertical and horizontal integration. These

French EV/HEV manufacturers have a lot of relation and network in all Europe suppliers that

can produce inputs that are important for innovation and internalization. In addition to this, the

French electric/hybrid car manufacturers have also a network of distributers supporting it in the

European zone. However; the zone covered by those networks is mainly Europe and does not go

that further.

The R&D-The departments of the French EV/HEV companies enabled to produce cost effective

and good performance EV/HEV in French. This can be exemplified as stated in Table 1above;

the travel range (kilometer) with single battery charge of various vehicles produced by different

French electric/hybrid car manufacturers indicate as there is extensive R&D to upgrade the

performance of EV/HEV.

Peter (2012) described that among French EV/HEV manufactureres "Renault's value chain is

well implanted and efficient in France and its structure is part of its success in Europe market.


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Renault strongly invests in research and development in order to provide constant innovations.

The production is mainly outsourced, but the assembly is made in France and over Europe"

(p.12).

Marketing & Sales- The same author further explained taking as example the Marketing &

Sales of French car Manufacturer Renault as it has important marketing budgets and uses

advertisement as a competitive tool. Regarding sales and service, Renault owns its own car

dealership in France, and some other have the exclusivity to sell Renault cars. This way, the

company has a maximum impact in the market and controls its sales and customer service in

official dealerships.

When we look at another French car manufacturer the Peugeot iOn is really appreciated in

France. All customers like this brand for its history and innovative side.

According to Peter (2012) as international marketing plan for the launch of an electric / hybrid

car by a French auto manufacturer in the U.S. market should consider the following points:-

"In the U.S, the company would have to review is marketing and sales process of the

value chain. Indeed, a French manufacturer has no presence in the American market and

car companies have different approach of marketing and sales in the United States.

Marketing techniques are the core solution to generate sales as well as customer retention

and customer service. Customer relationship management is much more evolved in the

U.S than it is in France. In order to best deal with these differences, French

Manufacturers should establish a strong competitive analysis on competitors, a behavior

analysis on customers and an in-depth bench-marking about American marketing

strategies. This way they will benefit from the U.S market knowledge accumulated in


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research marketing and combine it with their national skills of leader and develop a

potential sustainable competitive advantage"(p.12).

"More precisely, the competitive benchmarking should be conducted from two

perspectives. First, an analysis of each step of the competitions value chain in order to

distinguish the competition core competences. This will allow a French electric/hybrid

car manufacturer to understand the competition strengths in terms of production and

supply. The second benchmarking perspective should be conducted on customers, their

expectations and behavior. This benchmark will allow a French electric/hybrid car

manufacturer to understand the customer mind-set and its perceived value. As a result, a

French electric/hybrid car manufacturer will be able to adapt its upstream and

downstream strategy in order to compete with American car manufacturers and offer an

adapted value proposition to the market" (p.13).

Based on trough analysis of macro, meso and micro level for launching an electric / hybrid car

by a French electric/hybrid car manufacturer for the U.S. market allows us to state points that

are believed to be very critical factors for the success of the company and which will give hints

for the American car market is summarized as follow:

Apply creative promotional campaigns to further enhance brand recognition and

positioning as brand image has a strong importance in the United States.

Further capitalizing on innovative corporate culture and strong R&D capabilities to

reduce charging time for batteries and to increase the range EV/HEV can go in a single

charge, aiming to gain competitive advantage.

Try to minimize possible supplier problems to accommodate the future expected

significant increase in demand through backward integration.


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Supply Chain Management: Competitive prices due to reduction of costs linked to the

supply chain management and efficiency.

Diversification Strategy: Based on alliances and horizontal collaboration.

Understanding of the market: Based on marketing research including: customers,

competition, target culture and behavior.

6. Political and Economic Barriers /with respect to export of electric/hybrid cars to the

U.S.

6.1 Political Barr iers

From a political perspective, several barriers have to be considered when exporting cars: "The

American government is directly involved in the automotive industry. If we take the example of

General Motors one of the top 3-car company of the U.S treasury, the government owns 33% of

the company. (Brendan Moore, 2011). It allows us to assume that the government has a certain

control over American corporations. Another example supporting this statement is the

investments made by the U.S Government in favor of Chrysler. Even though the government

recently ended its investments, it shows that the American government is supporting national car

companies. As a result, the exportation of a French electric/hybrid cars in the U.S might be

complicated as the government has more or less a market control. We can also notice that the

American government has a strong influence on the legal system and it could affect a French

electric/hybrid car manufacturer in its launch" (Peter, allfreepapers, 2012, p. 4).

According to International marketing car industry (2012) the following are the political barrier

that a French car manufacturer should consider to launch an electric/hybrid car in the U.S.

United state government restriction:- Every government needs restriction in order to

regulate the tariff, take care of their populations, etc


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National Export policy: - Every government needs to have some rule in order to

regulate the export in the country in order to reduce the different risks. We need to take

care about those policies and be focus on it.

Foreign exchange controls imposed by the American Governments: -all the products

are not accepted in the America governments. If a French company wants to launch an

electric/ hybrid car, it will be important to know if it can build it in France or if there is

something to change on the car (environmental aspect, performance, etc)

Exchange Controls: - The American Government, like every government, controls the

product that are coming in the country.

Labor restrictions strong union:- The labor low is different in different country and the

French car manufacturer should understand those restrictions to launch EV/HEV product

in U.S.

Change of Government party:- in U.S. there are two main parties; the republican one

and the democratic one. Both are not apply the same policy. If a product needs to be

launch on the American market, the company will need to be focus on which party is the

government and adapt itself to that and the restriction in place.

6.2 Economic Bar ri ers

One of the economic barriers that will happen if the French car manufacturer chooses the

exportation of electric/hybrid car to penetrate the U.S. market is the problem of currency. The

difference in currency of the two countries will result a problem in the accountancy, because the

production would be in Euros and the sales in Dollars. That would be, and a problem of higher

cost of production than cost of goods sold. In addition one of economic barrier is the distributor


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network. A French car manufacturer does not know anything about the distribution network in

the U.S.

Peter (2012) explained taking one of the French electric car manufacturer Renault " if it exports

its electric cars in the U.S, it will have to sell cars at a much higher price in order to make the

same benefit as in France as 1 equals $1.26. If we take an example of Renault selling a car

10,000 in France, the company will have to sell it for $12,667 in order to make the same profit

on the car sold. This might represent a difficulty as the car market is competitive in term of

prices and the company could lose potential market share if setting high prices, making cars

unaffordable" (Simon Kennedy and Patrick Donahue, as cited in Peter, 2012, p. 5).

Peter (2012) differentiates other barriers to international trade of cars. These include the shipping

costs, risks and other concerns of international trade. Related to these risks, some of the

economic barriers are more specifically distinguish in the following categories:

Trade barriers: "Regarding the economic barriers, it could be hard for a French company to

compete a huge American company/competitor like General Motors that is appreciate in all the

United States. Because of that, the American people are not waiting any foreign competitors"

(International marketing car industry, 2012, p. 7).

Tariffs barriers:Cars imported in the U.S are dutiable and it represents an additional potential

cost. A French electric/hybrid car manufacturer has to be aware of these potential costs and

highly informed about American standards and regulations in terms of foreign cars (Peter,

allfreepapers, 2012, p. 5).

Non-Tariffs:"The American government has specific regulations that are different from France

standards. Agencies such as EPA (Environment Protection Agency) and DOT (Department of

Transportation) provide information about requirements of the U.S Customs Service. These


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agencies provide information about & quota; safety standards, bumper standards, and air

pollution control (emission) standards & quota;" (Foreign-Born, 2010 as cited in Peter, 2012, p.

6). The above agencies also require some administrative forms to be completed, making the

administrative process longer (Peter, allfreepapers, 2012)

7. The Influence of Culture on the International Marketing Strategy

To analyze the influence of culture on the international marketing strategy to launch EV/Hybrid

cars by French manufacturer for the U.S. market, Hofstede and Hall models are adapted as points

of reference as follow:

7.1 Hofstede's Model

According to Hofstede (as cited in Peter, 2012) different cultures have different perceptions and

interpretations of things. As illustrated by Peter (2012, pp. 6-7) Hofstede's model of national

culture separates five different aspects as follow:-

i) Power Distance: we can consider that some inequality can be considered between

French and Americans. In physical and educational terms, both cultures have different values

and principles. Even though the politeness is strongly present in the U.S, a certain distance has to

be respected.

ii) Uncertainty Avoidance: is much more present in the U.S as it is in France. In the U.S,

rules, norms and laws are strongly approved and respected whereas in France, people often

disagree an uncertainty is more frequent. In the U.S, avoiding uncertainty results in strong

planification and coordination. This aspect might cause some cultural misunderstanding and

tensions between both cultures.


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iii) Individualism: is present in the US culture, whereas in France, the culture can be

considered as group oriented or community. The social status and person is considered and

rewarded in the U.S, while in France, groups and communities are favored.

iv) Masculinity: is strongly present in the U.S, especially in the business environment where

success, salary, cars, watch and social representation matter a lot. Masculinity is less present in

France, where talking about income is often perceived as rude. Moreover, the feminine role of

women in business is being defended and increasing in France (unions).

v) Time perspective: is completely different in the French and American culture. Indeed,

the American culture is focused on the future and often projecting on future project, forecasts

and expansion. On the other hand, the cultural and historical background of France is part of the

nation pride and French often refer to the past as a reference. Protectionism of the historical

French culture and protocol is strongly implemented and installed in the French values. This

perspective might cause some issues when discussing future plans, Americans can be perceived

as too confident and optimistic, whereas French might be focused on analysis based on the past.

7.2 Edward Hall

Based on Hall's Model, Peter (2012) explained communication context and the Customer-

oriented culture aspects as follow:-

a) Hall's communication context

According to Hall's (as cited in Peter, 2012) "communication context, the French culture can be

considered as a high context culture whereas the American culture as a low-context culture. As a

result, many cultural factors differ between both cultures, leading to potential cultural clashes.

Elements such as time, money, relationships, business, communication, beliefs, values and

norms constitute strong cultural differences. For example, it is common measure to develop


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relationship at work in France and being 5 minutes late is tolerated. In the U.S, business relations

are based on deals and achievements, and punctuality has a major importance in business affairs.

These two examples highlight the cultural differences that might lead to cultural

misunderstanding and inefficient business relationships"(pp. 7-8).

The same author further identified that If French EV/hybrid car manufacturer launching its

electronic cars in the U.S, the business relationships might be problematical and build barriers to

success. To have knowledge of these cultural differences will smooth the process of conducting

international business.

b) The Customer-oriented culture

According to Peter (2012) "The American culture is oriented on customer service and its quality.

Indeed, companies view customer relationship management (CRM) as a way to develop

customer loyalty and improve customer service. As a consequence, the approach of personal

selling is very different from one culture to another. In France, personal selling is much more

impersonal and sellers are only here if the customer requires any information. In the U.S, we fall

under the impression that the seller is here to guide the customer through the brand, its product or

services and convince him of the company's products. Personal selling in the U.S will oriented

on communication and customer attention, whereas in France, the customer first makes his own

opinion of the product, and then the communication will go from the customer to the seller. In

the U.S, the communication is more like a dialogue and starts from the seller to the customer.

French sellers are convinced that if the product does not meet the customer's expectations, then

he will not be likely to buy it. In the U.S, even though the product does not meet the customer's

expectations, the seller will try to convince the customer with commitment and defend its

product/brand" (p.8-9).


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As a consequence, a French customer in the U.S will feel stalked whereas the American

customer in France will feel abandoned. French EV/Hybrid car manufacturer needs to focus on

these aspects if implementing a distribution center, a license or any type of sales that could

involve a customer.

8. The type of market entry modes that the French car manufacturer should consider

According to Hollensen, (2011) entry mode is an institutional arrangement for the entry of a

companys products, technology, human capital and services into a new foreign market. The

main types of entry modes are export, intermediate and hierarchical modes. The same author

explores these types of entry modes as follow:

i) Export modes: "With export entry modes a firms products are manufactured in the

domestic market or a third country and then transferred either directly or indirectly to the host

market. Export is the most common mode for initial entry into international markets. Sometimes

an unsolicited order is received from a buyer in a foreign country, or a domestic customer

expands internationally and places an order for its international operations. This prompts the firm

to consider international markets and to investigate their growth potential. Exporting is thus

typically used in initial entry and gradually evolves towards foreign-based operations. In some

cases where there are substantial scale economies or a limited number of buyers in the market

worldwide (e.g. for aerospace), production may be concentrated in a single or a limited number

of locations, and the goods then exported to other markets" (Hollensen, 2011, p. 335).

The commercial activity of export modes is very important as it allows boosting an economy

with highlighting the companies and its country efficiency in a global world.


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ii) Intermediate entry modes: "are primarily vehicles for the transfer of knowledge and

skills between partners, in order to create foreign sales. In addition to this there is no full

ownership (by the parent firm) involved, but ownership and control can be shared between the

parent firm and a local partner. This is the case with the (equity) joint venture" (Hollensen, 2011,

p. 356).

Hollensen (2011) explaned the most relevant intermediate modes as follow:

a) Contract manufacturing: is outsourced to an external partner, specialized in production

and production technology. It enables the firm to have foreign sourcing (production)

without making a final commitment.

"Management may lack resources or be unwilling to invest equity to establish and

complete manufacturing and selling operations, but contract manufacturing keeps the

way open for implementing a long-term foreign development policy when the time is

right. These considerations are perhaps most important to the company with limited

resources. Contract manufacturing enables the firm to develop and control R&D,

marketing, distribution, sales and servicing of its products in international markets, while

handing over responsibility for production to a local firm" (p.356).

b) Licensing: The licensor gives a right to the licensee against payment, e.g. a right to

manufacture a certain product based on a patent against some agreed royalty. It is another

way in which the firm can establish local production in foreign markets without capital

investment (p.358).

c) Franchising:The term franchising is derived from the French, meaning to be free from

servitude.


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In Franchising, the franchisor gives a right to the franchisee against payment, e.g. a right

to use a total business concept/system, including use of trade marks (brands), against

some agreed royalty (p. 361).

"Franchise activity was almost unknown in Europe until the beginning of the 1970s. The

concept was popularized in the United States, where over one-third of retail sales are

derived from franchising, in comparison with about 11 per cent in Europe" (Young et al.,

1989, as cited in Hollensen, 2011, p. 361).

A number of factors have contributed to the rapid growth rate of franchising. First, the

general worldwide decline of traditional manufacturing industry and its replacement by

service-sector activities has encouraged franchising. It is especially well suited to service

and people-intensive economic activities, particularly where these require a large number

of geographically dispersed outlets serving local markets. Second, the growth in

popularity of self-employment is a contributory factor to the growth of franchising.

Government policies in many countries have improved the whole climate for small

businesses as a means of stimulating employment

d) Joint venture: is an equity partnership typically between two partners. It involves two

parents creating thechild (the joint ventureacting in the market) (p.366).

Hollensen, (2011, p. 366) pinted out that there are a number of reasons setting up joint ventures:

Complementary technology or management skills provided by the partners can lead to

new opportunities in existing sectors.

Many firms find that partners in the host country can increase the speed of market entry.

Many less developed countries, such as China and South Korea, try to restrict foreign

ownership.


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Global operations in R&D and production are prohibitively expensive, but are necessary

to achieve competitive advantage.

In joint venturing companies put their knowledge, technologies and resources to reach objectives

that each company could not have reached alone. This also allows the companies to share the

risks and profits that the joint venture engenders (International marketing car industry, 2012, p.

6).

iii) Hierarchical entry mode: is the final group of entry modes is the hierarchical mode,

where the firm completely owns and controls the foreign entry mode. Here it is a question of

where the control in the firm lies. The degree of control that head office can exert on the

subsidiary will depend on how many and which value chain functions can be transferred to the

market. This again depends on the allocation of responsibility and competence between head

office and the subsidiary, and how the firm wants to develop this on an international level

(Hollensen, 2011, p. 386).

If a producer wants greater influence and control over local marketing than export modes can

give it is natural to consider creating their own companies in the foreign markets. However, this

shift involves an investment, except in the case of the firm having its own sales force, which is

considered an operating cost (Hollensen, 2011, p. 386).

We have seen the main groupings of entry modesavailable to companies that wish to take

advantage of foreign market opportunities in the aforementioned section.

A firms choice of its entry mode for a given product/target country is the net result of several

conflicting forces. The need to anticipate the strength and direction of these forces makes the

entry mode decision a complex process with numerous trade-offs among alternative entry modes

( (Hollensen, 2011, p. 322).


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Generally speaking the choice of entry mode should be based on the expected contribution to

profit. This may be easier said than done, particularly for those foreign markets where relevant

data are lacking. Most of the selection criteria are qualitative in nature, and quantification is very

difficult.

It cannot be stated categorically which alternative is the best. There are many internal and

external conditions which affect this choice and it should be emphasized that a manufacturer

wanting to engage in global marketing may use more than one of these methods at the same

time. There may be different product lines, each requiring a different entry mode.

Accordingly the following entry mode is suggested based on the internal & external factors as

follow:

French Electric /Hybrid car manufacturers are limited in France market only. As a result French

manufacturers could choose export entry modes to penetrate the U.S. market by producing

products in France that avoid high cost of delocalization. The cost incurred during exporting is

for transport, transport insurance and change in rate. This type of entry modes is advised for

French electric/hybrid car manufacturers that have limited resource. For some firms, domestic

markets may be unable to sustain sufficient economies of scale and scope, and these companies

automatically include export markets as part of their market-entry strategy. As the firm grows it

will increasingly use the hierarchical model.

Peter (2012) described that taking into account exportation as a market entry strategy is a valid

option for French electric/hybrid car manufacturers to limit their investment by exporting their

products and it will allow the company to analyze customer reaction and limit expenses and

implication. The same author further explained that exporting a limited number of Renault's ZE


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would be a way to test the market reactivity and determine a future strategy. Nevertheless, this

entry strategy would be unproductive as the market competitiveness as intense.

The French EV/HEV manufacturers do not have an international experience. International

experience reduces the cost and uncertainty of serving a market, and in turn increases the

probability of firms committing resources to foreign markets, which favors direct investment in

form of wholly owned subsidiaries (hierarchical modes). These modes could be choosing by

French manufacturers to acquire assets such as plants and production equipment in the United

States. In consequence, the company is producing in U.S. and sells its product in the same

country's market. This could allow French manufacturer to control everything from the

beginning to the end, and to reduce the cost of car, as cars would be produced in dollar and sold

in dollar, which would not be the case with using the exporting solution for example (produced

in Euros and sold in Dollar).

United State is large sized country in the world and the rate of electric car market growth is high.

According to Hollensen, (2011) the larger the country and the size of its market, and the higher

the growth rate, the more likely management will be to commit resources to its development, and

to consider establishing a wholly owned sales subsidiary or to participate in a majority-owned

joint venture.

I addition to this a joint venture with an American car manufacturer to penetrate the market is

easier, because the car industry in U.S. is under the state protection, and that can be hard to

compete (International marketing car industry, 2012).

As declared above, developing horizontal collaborations will benefit French manufacturers when

entering the American market with its new electric cars. Peter (2012) explained taking the case

of Renault that establishing a joint venture with an American car manufacturer, Renault transfer


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the technology and models to the U.S. and the American corporation helps to introduce market

and distribute the models. In addition, this type of alliance will also assist the company to be

accepted by the competition, the government, and most importantly, customers. Using the joint

venture strategy will also allow French EV/HEV manufacturers to keep a minimum of control

upon their products.

9. International Product Life-Cycle and its implications for the electric /hybrid car

9.1 I nternational Product L ife Cycle (IPLC)

According to Hollensen (2011) the IPLC theory describes the diffusion process of an innovation

across national boundaries. As illustrated Figure 1, for each curve net export results when the

curve is above the horizontal line; if the curve is below the horizontal line net import results for a

particular country.

The international product life cycle is a theoretical model describing how an industry evolves

over time and across national borders. This theory also plans the development of a companys

marketing program when competing on both national and foreign fronts. International product

life cycle concepts combine economic principles, such as market development and economies of

scale, with product life cycle marketing and other standard business models (Wisegeek, 2014).

The IPLC is further summarized by (Professor Cooney, 2014) as follow:-

Describes diffusion of an innovation across national boundaries.

Demand grows first in innovating country and is then exported.

Eventually demand grows in Low Developing Countries (LDCs).
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Figure 1; IPLC curves

Source: Power point on international marketing (Onkvisit and Shaw, as cited in ProfessorCooney, 2014, p. 256)

According to Hollensen (2011) when expanding the concept of the PLC to international markets

two different approaches appear summarized as follow:

a. International product life cycle (IPLC)a macroeconomic approach

IPLC is considered from a macroeconomic perspective that views typically, demand first grows

in the innovating country (here the United States). In the beginning excess production in the

innovating country (greater than domestic demand) will be exported to other advanced countries

where demand also grows. Only later does demand begin in less developed countries.

Production, consequently, takes place first in the innovating country. As the product matures and

technology is diffused production occurs in other industrialized countries and then in less

developed countries. Efficiency/comparative advantages shift from developed countries to

developing countries. Finally, advanced countries, no longer cost-effective, import products from

their former customers.


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b. PLCs across countriesa microeconomic approach:

In foreign markets the time span for a product to pass through a stage may vary from market to

market. In addition, due to different economic levels in different countries, a specific product can

be in different PLC stages in different countries. Figure 2 shows that the product (at a certain

time, t1) is in the decline stage in the home market, while it is in the maturity stage for country A

and in the introduction stage for country B.

Figure 2: PLCs of different countries for a specific product

Source: Power point on international marketing (Professor Cooney, 2014, p. 258)

The four primary elements of the internationalproduct life cycle theory are: the structure of the

demand for the product, manufacturing, international competition and marketing strategy, and

the marketing strategy of the company that invented or innovated the product. These elements

are categorized depending on the products stage in the traditional product life cycle (Wisegeek,

2014).
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The stages of the basic product life cycle, Introduction, growth, maturity, and decline are

explained as follow:-

The I ntr oduction Stage of Product Li fe Cycle

The introduction phase of the product life cycle (PLC) can be explained from technology,

marketing and production aspects by Grant, Armstrong and Kotler (as cited in McGrath, 2012)

as follows:-

From technological perspectives the introduction phase of product life cycle is characterized by

emerging technology, early technology S-curve, and state of the art but buggy market

experiments of lab results. In addition to that the marketing practice is aiming at creating product

and technology as well as establishing legitimacy, innovative customers low level of

performance/price ratio due to high cost driven prices, low sales and revenue volumes, negative

profit margins for true long term strategies and positive profit margins for hit and run strategies

as well as few incompatible competition that shape the opportunity for the future.

In addition to the aforementioned points during the introduction stage, the product is new and not

completely understood by most consumers. Customers that do understand the product may be

willing to pay a higher price for a cutting-edge good or service. Production is dependent on

skilled laborers producing in short runs with rapidly changing manufacturing methods. The

innovator markets mostly domestically, occasionally branching out to sell the product to

consumers in other developed countries

Finally this phase is characterized by high production unit costs, low scale and lack economic of

scale, job shape batch production process selection and fixed position process. International

competition is usually nonexistent during the introduction stage of the international product life

cycle.


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The Growth Phase of Product Li fe Cycle

The growth phase of the product life cycle can be explained from technology, marketing and

production aspects by Grant, Armstrong and Kotler (as cited in McGrath, 2012) as follows:-

Looking at the technological conditions of this stage it is characterized as pacing, rising S-

curves, and incompatible product variations until dominant design appears.

Gaining market share by attracting customers that are early adopters is one aspect of the

marketing condition that typically explains this stage. In addition to that when we look at the

price/performance aspect of marketing, the growth stage is typically characterized by enhanced

performance that emanate from rising S-curves. Increasing sales/revenue, positive and rising

wild profit variations that establish common profitability in addition to signaling new

competition are the other marketing dimensions that are typical to this stage of product life cycle.

During the growth stage competitors in developed markets begin to copy the product and sell

domestically. These competitors may also branch out and begin exporting, often starting with the

county that initially innovated the product. The growth stage is also marked by an emerging

product standard based on mass production. Price wars often begin as the innovator breaks into

an increasing amount of developed countries, introducing the product to new and untapped

markets.

Finally, looking at the production unit costs, process selection, and process layout; falling in

transition, batch mass production, and process are the typical characteristics that represent the

PLC respectively.


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The Matur ity Phase of Product Li fe Cycle

The maturity stage the product life cycle can be best explained by taking into account

dimensions of technology, marketing, customers, performance/price, sales/revenue, competition

production unit costs, process selection and process layout as it has been illustrated by Grant,

Armstrong and Kotler (as cited in McGrath, 2012) as follows:-

Regarding technology the maturity phase is identified by the condition of having key technology

and the technology S-curve breches their natural limits. At this stage there are sophosticated

consumers who have high quality expectetions accordingly at this stage many competitors run

out of business if they are not in a position to satisfay the sophesticated expectetions and

preferences of consumers.

In this phase of the product life cycle the marketing effort of business organizations focuses on

defending their market share in order to maximaize profit. This is done by shifting their

marketing efforts from early adopters to the mass consumers, with enphasis on repeate purchase

if possible. This implies that the performance/price ratios are higher and highest due to the

exsitance stable performance at lower prices associated with the exisitance of high production

rates and high demand.

This stage of the product life cycle also characterised by the precence of many but similar

competitors with no dominet better design and products mostly differ in some product features

which has little in differnciating the product of one player from another. This implies that the

profit margin at this stage is increasing at decrising rate then stagnates.

At some point of this maturity stage of the international product life cycle and even the global

marketplace becomes saturated, meaning that almost everyone who would buy the product has

bought it, either from the innovating company or one of its competitors. Businesses compete for


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the remaining consumers through lowered prices and advanced product features. Production is

stable, with a focus on cost-cutting manufacturing methods, so that lowered prices may be passed

on to value-conscious consumers.

Finally when we look at the production unit costs in this stage we found that there is high

economics of scale and economics of scope which implies that there is high asset utilization and

this is supported by the exisitance of a mechanized mass production process to satisfay

customers at mass customization which is made by making the process layout to be configered

based on product that can accomodate fleaxible manufacturing.

The Decline Phase of Pr oduct Lif e Cycle

Like the other ph

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