value of Kia’s technology, design and innovative approach to brand management PEST MODEL
Political: * Give incentive to buy American cars in NA and tariffs on imported cars. * Possible regulation on the number of cares exported or allowed to be * Government related contracts. | Economical: * imported cars face tariffs * Gas prices increasing continuously * Recession hit globally affecting the profit margins. * Due to recession people were looking to buy cheaper cars which benefitted Kia sales. | Social: * Global warming and harmful emissions * Fuel efficiency * CSR expense 11,080. (in millions) * Eco-friendly products * Hybrid cars/green cars * Kia Brand name has increased due to more KIA cars on the road. | Technological: * Design awards received * GLOBAL R&D: 796 billion * Electronic vehicle production being currently worked on and planning to be launched in 2011 (more stuff pg 26) * Possible small scale production of “Fuel Cell Electronic cars” in 2012. |
Starting with the PEST model we look at the political, economical, social and technological factors that play a role in the company’s present and future. The biggest political factor that affects the company in the present and the future is the government regulations on the tax and tariffs on the cars that are not American. The company has to negotiate contracts and renew them every so often to set a limit on the number of cars that are being imported and how much tariff that has to be paid. In the past the government has even given subsidies to American cars, which is a disadvantage for KIA. Moving on to the economical factors that affect the company we can see the biggest impact was due to recession. The recession actually benefited KIA as their sales increased. More people in the economy were looking for inexpensive cars as there was inflation and less money supply in the economy. Interest rates also dropped so it became easier for the public to finance and lease cars. Another economical factor that has a huge impact on sales was the gas prices. The increase in gas prices caused an average consumer to go for automobile with better fuel efficiency. This affects the future as well in terms of Kia being forced to be more innovative to launch more cars that require less fuel and go beyond hybrid. The social factors that affect Kia are the topics of global warming and harmful emissions. To cope with these factors Kia brought out the concept of eco friendly cars. These models not only included hybrid cars but as well as green cars which reduced the harmful emissions produced by a car. The technological factors that we must look at are the high standards of innovation by other automobile companies. Kia has a global R&D department and spends billions of dollars in order to stay competitive. They have introduced new technology such as the green cards and as well as the electronic vehicles. Kia is currently working on a small scale project and possibly plans to introduce the “fuel cell” cars by 2012. All these factors not only affect the company’s present but also the future.
PORTERS 5 FORCES
FORCES| | REASONS |
Threat of new entryLOW| * Economies of scale – H * Customer switching costs - L * Capital requirements - H * Restrictive gov’t policy - M | In the automobile industry it requires a very high capital requirement to enter the marker. The production is usually done on a basis of economies of scale. You also have to pass certain government regulations in order to be approved as a company and automobile production. On top of that there are very low switching costs for customers therefore the threat to new entry is very low. Not everyone can enter this market. | Power of suppliersLOW- MEDIUM| * Supplier concentration - H * Supplier dependency - M * Switching costs - L * Product differential - L * Substitutes - M| A of the equipment, supplies and products are supplied by...