Thesis (MBA (Business Management))--Stellenbosch University, 2008. / ENGLISH ABSTRACT: The aim of this research report is to identify the impact of the changes in retail pricing driving forces since the introduction of the Motor Industry Development Programme (MIDP) in 1995, identify the shortcomings and develop an improved retail pricing principle model for Volkswagen of South Africa (VWSA), taking cognisance of the changing competitor environment. The anticipated outcome will be to improve WVSA's
competitive position in the South African automotive industry (SAAI) passenger vehicle market by securing market share and optimising profitability.
Prior to 1995, the SAAI passenger vehicle market was highly protected and competition was low. Cost increases affected all Original equipment manufacturers (OEMs) to the same extent and therefore retail price increases were similar. However, the introduction of the MIDP in 1995, resulted in a reduction of the protection levels, inviting new global competition. It furthermore resulted in structural changes which affected the status quo of the competitor framework and caused a relative change in the cost base between competitors. The structural changes lead to new variables
affecting costs and ultimately retail prices to different extents for the various competitors. This necessitated the understanding of, not only VWSA's own organisation's cost drivers and behaviour, but also that of key competitors in order to develop optimal retail pricing principles. Retail pricing driving forces are redefined in section 3.4 and divided into the "Role of the economy" (section 3.4.3) and the "Role of the government" (section 3.4.4). As a consequence of the difference in cost basis of the
various competitors, this left the SAAr passenger vehicle market uncertain as to retail pricing principles to be followed.
The author makes use of primary data collected from interviews and secondary data collected from content analysis, literature reviews and various SAAI passenger vehicle information centres to achieve the aim of this research report. Retail pricing principles and influences based on international marketing are explored and evaluated for the SAAI passenger vehicle market in Chapter 4. Retail pricing principles consist of two elements, namely the determination of a retail price for a new product and the evaluation of inflationary retail price increases for existing products. The former is
considered well applied by the SAAI passenger vehicle market. The latter was
identified as the main weakness in the SAAr passenger vehicle market and receives attention in Chapter 6 and Chapter 7.
The evaluation of the cost position of WlSA for the period 2003 to 2007 indicates that WlSA is at a cost disadvantage (including fixed cost) of 12 percent (of retail pricing)against Toyota SA and six percent against Chinese importers, taking into account the total impact of exchange rate and inflation. Therefore, WISA will be under the most pressure to increase retail prices. This is the case before the effect of a natural currency hedge, MIDP duty differentials and imported content inflation is considered.
As a result of price elasticity of demand (PED), the pressure to increase retail prices more, relative to key competition, could have a negative impact on WISA's market share and consequently its profitability and long-term sustainability. Furthermore, should the macroeconomic situation not improve, the cost focussed competitor strategies of Toyota SA and Chinese importers might be more desirable to the end consumer from an affordability perspective. The main strategic focus areas to support WISA's premium pricing strategy are the improvement of:
• Consumer centricity satisfaction index for sales and service.
• Quality standards.
• Brand strength.
• Supplier cost competitiveness.
• Productivity.
A new retail pricing principle model, TRIPP (consisting of three steps), is developed in Chapter 6 to address the changes in the retail pricing driving forces and cost structures, which caused uncertainty with reference to retail pricing in the SAAI passenger vehicle market. This model determines the required percentage retail price increase in order to retain a net margin percentage for WISA relative to key competitors. The aim is to provide VWSA with intelligent market information to assist in the optimisation of retail
price increase decisions. By applying TRIPP (STEP ONE and STEP TWO), it has been discovered that, as at the end of quarter two 2008, Toyota SA has experienced the least pressure (6.1 percent of retail pricing), whereas WISA experienced a little more (7.5 percent of retail pricing) and Chinese importers have experienced far more pressure (17.7 percent of retail pricing) than either WISA or Toyota SA to increase retail prices (after taking into account the effect of natural currency hedge and MIDP). Theoretically
it means that it should be safe for VWSA to increase retail prices by a minimum of 6.1 in comparison to Toyota SA (Figure 6.10), resulting in VWSA's profitability deteriorating by 1.4 percent of retail pricing. However one should not price without considering the following:
• Current market conditions with consumers having low levels of disposable income.
• The impact of the principle of price elasticity.
• Exchange rate volatility, keeping in mind that once the SAAI passenger vehicle market has moved pricing, retail prices will not reduce for reasons previously discussed. A concept, the tipping point, is relevant.
It is extremely important to take cognisance of the tipping point concept and consider it wisely when making retail price increase decisions. If not, a price war with negative implications on profitability may follow. It will impact on long-term investment strategies taking longer to render a return. This situation will not benefit any competitor in the long run.
Other elements that should be monitored and considered before making a final decision whether or not to increase retail prices or on the extent of increases are discussed in section 6.3.5 and also listed in the previous section. These are different for each OEM and importer and it is therefore not possible to do a competitive analysis without inside information, but should not be ignored when considering retail price increases.
Having identified the shortcomings in VWSA's current retail pricing principles, with reference to price increases, it is proposed that the current retail pricing model used by VWSA be replaced by the TRIPP model (which was implemented in September 2008)in order to improve the intelligence of decision-making with reference to retail price increases and optimise profitability and market share. In order to ensure meaningful results from the TRIPP model, the following key points are of importance:
• Know the SAAI market drivers.
• Know your cost drivers, also relative to key competitors.
• Understand the impact of certain "other" elements as listed under TRIPP: STEP THREE.
• Know and focus on key strategic issues influencing your product in order to allow premium pricing.
The above mentioned points should be reviewed regularly, monitored by dedicated project teams and continuous improvement be applied to the TRIPP model.
"It is all about getting to the future first." (Roberts, 2008, [Online]) and knowledge is power. Volkswagen of South Africa should therefore ensure it gets there before key competitors do in order to ensure sustainability in the SAAI / AFRIKAANSE OPSOMMING:
Die doel van hierdie navorsingsverslag is om die veranderinge in dryfkragte ten opsigte
van verkoopsprysbepaling sedert die inwerkingstelling van die Motor Industrie
Ontwikkelingsprogram (MIOP) in 1995 te identifiseer en daarvolgens 'n verbeterde
verkoopsprysbepalings-model vir Volkswagen van Suid Afrika (VWSA) te ontwikkel, met
spesifieke inagneming van die voortdurende veranderinge in die kompeterende
omgewing binne die industrie. Die resultaat beoog om VWSA se kompeterende posisie
in die Suid Afrikaanse motorindustrie (SAMI), in besonder die passasiersvoertuigmark,
te verseker by wyse van die verhoging van markaandeel en winsgewendheid.
Die passasiersvoertuigmark binne die SAMI het aansienlike beskerming geniet en
kompetisie was gering tot en met 1995. Verhogings in koste het aile plaaslike
motorvervaardigers op soortgelyke wyse beinvloed en gevolglik was prysverhogings
met betrekking tot verkoopspryse ook soortgelyk.
Die inwerkingtreding van die MIOP in 1995 het egter gelei tot verlaagde
beskermingsvlakke wat tot gevolg gehad het dat globale kompetisie die mark aantreklik
gevind het. Voorts het strukturele veranderinge ingetree wat die status quo van die
kompeterende omgewing geaffekteer het en relatiewe veranderinge in onderlinge koste
tussen kompetisie tot gevolg gehad het. Nuwe elemente het na yore getree met 'n
direkte invloed op koste en eindelik ook op verkoopspryse in die kleinhandelsmark.
Begrip van die dryfkragte en gedrag, nie aileen binne VWSA, maar ook ten opsigte van
sleutelkompetisie, het noodsaaklik geword ten einde optimale prysbepalingsbeginsels te
bepaal. Die dryfkragte word in afdeling 3.4 herdefinieer en opgedeel in die "Rol van die
ekonomie" (afdeling 3.4.3) en die "Rol van die regering" (afdeling 3.4.4). Die verskille in
die kostebasisse van verskeie mededingers het die passasiersvoertuigmark onseker
gelaat met betrekking tot verkoopsprysbepalings.
Die skrywer maak gebruik van primere data (by wyse van onderhoude bekom) en
sekondere data (gevorder by wyse van inhouds analise, nagaan van literatuur en
verskeie inligtingsentrums in die passasiersvoertuigmark) om die einddoel te bereik.
Prysbepalingsbeginsels in die kleinhandelsmark en die uitwerking van die
internasionale mark daarop. word in Hoofstuk 4 ondersoek en geevalueer. Prysvasstellingsbeginsels bestaan uit twee elemente, naamlik die bepaling van pryse
op nuwe produkte en die evaluasie van inflasionere verhogings op die pryse van
bestaande produkte. Eersgenoemde word suksesvol geag en redelik volledig toegepas
binne die SAM! passasiersvoertuigmark, maar laasgenoemde word as die belangrikste
tekortkoming geIdentifiseer en word gevolglik breedvoerig in Hoofstukke 6 en 7
behandel.
Die beoordeling van die kosteposisie gedurende die tydperk 2003 tot 2007 het getoon
dat VWSA oor 'n 12 persent kostenadeel beskik (vaste koste ingesluit) teenoor Toyota
SA en ses persent teenoor Chinese invoerders. Die totale impak van die wisselkoers
sowel as inftasie is in ag geneem by berekening van hierdie syfers. Die gevolg is dat
VWSA onder ho;; druk verkeer om prysverhogings toe te pas, relatief tot sleutelkompetisie.
Hierdie is die posisie voordat die uitwerking van 'n natuurlike wisselkoersverskansing,
MIOP invoerkoste differensiasie en ingevoerde materiaal koste inflasie in
ag geneem is. As gevolg van pryselastisiteit van aanvraag (PEA) kan die hoer druk op
VWSA om verkoopspryse te verhoog (relatief tot sleutel kompetisie), 'n negatiewe
invloed op VWSA se markaandeel en gevolglik op die winsgewendheid en langtermyn
volhoubaarheid tot gevolg he. Voorts mag die kostegesentreerde-strategie van Toyota
SA en Chinese invoerders vir die eindverbruiker meer bekostigbaar voorkom indien die
makro ekonomie nie verbeter nie. Die belangrikste strategiese fokusareas ten einde
VWSA se premieprys-strategie te ondersteun, is die verbetering van:
• Verbruikers tevredenheidsindeks met betrekking tot verkope sowel as dienste.
• Kwaliteit standaarde.
• Handelsmerksterkte.
• Koste kompeterendheidsindeks.
• Produktiwitei!.
In Hoofstuk 6 word 'n nuwe prysvasstellingsmodel, die TRIPP model, ontwikkel. Hierdie
model bestaan uit drie stappe en spreek die veranderinge aan van die dryfkragte en
kostestrukture wat tot onsekerheid in die prysbepaling van passasiersvoertuie gelei he!.
Die model bepaal die verlangde prysverhogingspersentasie om 'n vaste
winsgewendheidspersentasie te behou. Die model se doel is om intelligente inligting
aan VWSA te verskaf wat benodig word om prysverhogings te optimiseer. Die
toepassing van stap een en stap twee het aangedui dat Toyota SA tot en met die tweede kwartaal 2008 onder die minste druk verkeer het om prysverhogings toe te pas
(6.1 persent van verkoopsprys). Daarenteen het VWSA onder effe meer druk verkeer
(7.5 persent van verkoopsprys) en die Chinese invoerders het die meeste druk verduur
(17.7 persent van verkoopsprys). Hierdie berekeninge is gedoen met inagneming van
die uitwerking van natuurlike wisselkoersverskansing, MIOP invoerkoste differensiasie
en ingevoerde materiaal koste inflasie. Die teoretiese afleiding hieruit blyk te wees dat
VWSA met veiligheid 'n verhoging van verkoopsprys kan toe pas van ongeveer 6.1
persent (Figuur 6.10). Die effek sal 'n afname van 1.4 persent in winsgewendheid tot
gevolg he, maar geen prysverandering behoort te geskied sonder oorweging van die
volgende nie:
• Huidige marktoestande met verbruikers wat oor lae vlakke van besteebare inkomste
beskik.
• Die impak van die pryselastisiteits beginsel, gegewe die vorige punt.
• Onsekerheid van wisselkoerse, met spesifreke inagneming dat kleinhandelspryse
nie sal verlaag nadat aanpassings gemaak is nie. Die "tipping pOint" konsep is van
belang op hierdie stadium.
Dit is uiters belangrik dat die "tipping poinf konsep in ag geneem word wanneer
besluite geneem word in verband met prysbepaling om te verhoed dat 'n prysoorlog
ontstaan met vanselfsprekende negatiewe gevolge op winsgewendheid vir die industrie.
Geen rolspeler sal in sodanige omstandighede voordeel trek op die lange duur nie,
aangesien langtemnyn belegginsstrategiee hierdeur geaffekteer sal word deurdat
opbrengste op beleggings uitgestel sal word.
In afdeling 6.3.5 word verdere elemente behandel wat oorweeg behoort te word voordat
prysverhogings plaasvind. Hierdie elemente is verskillend vir elke plaaslike
vervaardiger en invoerder en gevolglik is dit nie moontlik om 'n kompeterende analise te
doen sonder interne inli9tin9 nie. Die impak van hierdie elemente mag egter nie gering
geskat word nie.
Die beginsels ten opsigte van verkoopspryse, soos tans deur VWSA toegepas, is
nagegaan en tekortkominge is ge'identifiseer, in besonder wat prysverhogingsbesluite
betref. 'n Nuwe verkoopsprys bepalingsmodel, die TRIPP model, is voorgestel en in
September 2008 ge"implimenteer binne VWSA ten einde die besluitnemingsproses vir
prysbepaling te optimiseer om sodoende markaandeelhouding en winsgewendheid te maksimiseer. Die volgende sleutelpunte is van belang ten einde te verseker dat die
TRIPP model effektief toegepas kan word:
• Ken die markaanwysers in die SAMI.
• Ken die koste aanwysers, oak met betrekking tot sleutelkompetisie.
• Verstaan die impak van sekere ander elemente soos gelys in stap drie van die
TRIPP model.
• Identifiseer en fokus op sleutel strategiese kwessies am premie-pryse te regverdig.
Bogenoemde aspekte behoort gereeld hersien te word en dit word vereis dat
toegewyde projekspanne dit voortdurend sal monitorr en oak deurgans verbeteringe
aanbring aan die TRIPP model.
"It is all about getting to the future first." (Roberts, 2008, [Online]) en kennis is mag.
Volkswagen van Suid Afrika moet dus verseker dat hul voor hul sleutelkompetisie bly
met betrekking tot die verwikkellinge rakende prysbepalings. Slegs dan sal hul 'n
kompeterende voordeel verseker en markaandeel en winsgewendheid maksimeer.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/5027 |
| Date | 12 1900 |
| Creators | Van der Merwe, Susan Josina |
| Contributors | Oosthuizen, H., Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Rights | Stellenbosch University |
Page generated in 0.0148 seconds