Abstract
For
a long time the market for luxury items has been concentrated in the developed
economies in North America, Europe and Japan. However, in the last 10 years
significant changes have occurred and continue to occur with the most notable
being the rapid rise of China as a luxury consumer market. In a survey that was
conducted by Clear Asia in 2010, a regional research and consultancy firm, BMW
was identified as the strongest brand ahead of Giorgio Armani and Rolex. The
objective of the research is to reveal the development of the BMW as a luxury
brand in China and as a consequence reveal the development of the Chinese
luxury market since currently BMW is the top brand in the country. The results indicate that the major areas of focus of the company
are; Distinctiveness, Power, Change of Culture, Publication Events and
Information. These aspects had been identified in theory as being critical in
the luxury market. A survey of the customers of the luxury car revealed that,
Power, Elegance, Authenticity and Quality were central to the luxury car
purchase decision. The overlap between the attributes listed by the customers
and the aspects focused on by BMW showed that the companies has been able to
achieve success through the alignment of its policies with the market
conditions in the Chinese luxury market. The research also focused on
identifying the major attributes of the Chinese luxury market. From the results
the most unique attributes are the huge size of the market and the rapid
expansion of the luxury market mainly from the newly wealthy group.
Accelerating growth and huge middle income customer base will have very strong
influence on the future trend of the Chinese luxury market. The sources of
information for the luxury consumers are also changing with the internet having
the fastest growth.
1.0 Introduction
1.1 Background of the Research
The
luxury segment of the market is in many ways the most interesting in all
markets. While the market almost always emerges from the most successful
rational markets, it is characterized by irrationality as the consumers generally
pay substantial premiums without any real exchange of value (Morrison, 2006).
The markets are usually characterized by unique items that are the hallmark of craftsmanship
(Ahuvia and Wong, 2002). The items sold in the luxury markets are usually used
as status symbols in the society or for personal reward for hard work. In
either case, they are a mark of success and exclusive access to the most
desired items in the world. For a long time the market for luxury items has
been concentrated in the developed economies in North America, Europe and Japan.
However, in the last 10 years significant changes have occurred and continue to
occur with the most notable being the rapid rise of China as a luxury consumer
market. The whole story of China as a luxury consumer market can be explained
within the last 10 years. Currently China is on its way to being the world’s
biggest market for luxury goods and is expected to surpass Japan by 2015 which
now controls about 40 % of the luxury market (Monash University Business and
Economics, 2007).
Most
of the major luxury brands have been trying to gain advantage in China in the
last 10 years. With an estimated 170 Million of the population is now able to
access finer things in life, making the market too attractive to ignore for any
luxury brand. The country has an
estimated middle income population of 250 million which is already in the
luxury market or will be joining in the next few years
(Bergstenet al, 2006). Such volumes are the ones making all analysts
stop and reflect on the likely trend in the market. For some time the most
popular items have been Clothing, Watches and Jewelry. These items have been
accessed abroad as well as locally and in close markets such as Taiwan, Macau
and Hong Kong. In 2010 however things changed again. In a survey that was
conducted by Clear Asia, a regional research and consultancy firm, BMW was
identified as the strongest brand ahead of Giorgio Armani and Rolex. This trend
indicates that the market is maturing and is now moving to the high value
commodities. Luxury vehicles rank among the top high end products together with
yachts. The move towards high end items is a trend that has been predicted by
the fast growth in income levels among the Chinese. The survey indicated that BMW had the
strongest effect among the luxury shoppers who stated that its power was too
much to resist.
BMW
is a German luxury car and like the other German luxury cars made by Daimler
and Volkswagen just like the Mercedes Benz and the Audi it is cutting its edge
in the Chinese luxury market (Datamonitor, 2010). This research aims at tracing the development
of the BMW brand in China alongside the development of the luxury market in
China to get a clear picture of the situation as it is and the likely trend in
the future. The luxury market segment contributes a great deal of wealth to the
global economy and a better understanding of the next biggest luxury market from
the perspective of the best luxury brand will therefore offer critical insights
in the understanding of the global luxury market and the global economy.
1.2 Research Objectives
The
objective of the research is to reveal the development of the BMW as a luxury
brand in China and as a consequence reveal the development of the Chinese luxury
market since currently BMW is the top brand in the country. This objective is
based on the general need to understand the developments of the world economy
in general. China has been the fastest growing country in the world for a long
time now and is poised to dominate the world economy in many ways in the
future. With its unique economic model and culture however it was not expected
that China would follow the conventional pattern of developed economies. Luxury
for example was not expected to be a major issue in China where the culture
emphasized on hard work and modest living as well as extreme saving. The
emergence of the luxury market as a key sector in the Chinese economy is
therefore an interesting phenomena which indicates that the Chinese economy may
not skip all the steps of the developed economies after all. The adoptions of
luxury lifestyles by the newly wealthy in China indicate that the Chinese
economy will in some respects still follow the conventional path of development.
This is a very interesting phenomenon as it has significant implications to
China and the rest of the world. It is one of the indications that conventional
business practices will become more and more popular in China as it adopts
western consumerism. The information developed from this research will
therefore provide business leaders and policy makers with a better understanding
of the trends in the Chinese markets and assist them make better decisions.
The
research will also help improve the existing literature on the development of
luxury markets and reveal new areas that may require further analysis to
understand.
1.3 Research Questions
The
research will be guided by a few questions which capture the essence of the
research. The rest of the research will be focused on answering the research
questions which will address the topic of the research. The questions are as
follows:
i.
What is the strategic positioning of BMW in China?
As
the top brand in China, BMW must be having superior brand positioning in China
that makes its brand the best choice for the luxury consumers. Although there
are other luxury vehicles brands in China, BMW has managed to emerge as the
best. The understanding of the strategic positioning will help understand the
most applicable aspect of marketing in the luxury market in China and the
strongest market segments. Under this question a few sub questions will also be
addressed. One of the sub questions is what sets the BMW brand apart from the
rest of the luxury items and what does this say about the Chinese luxury
market. This sub question will reveal
some of the attributes of the Chinese luxury market.
ii.
What are the unique attributes of the Chinese luxury market?
Obviously
the Chinese luxury market is very unique from the other luxury markets in Japan
and the USA which are sizable enough. However, there are unique attributes that
make the luxury car the most important brand. Although BMW has received good
scores in other markets as well, its growth in China has been the most
outstanding in all the markets. In 2009 the company made growths of close to
70% which are way above the national economic growth in China (Datamonitor,
2010). This indicates that the luxury market is very unique and the luxury car has
a very strategic fit in the market. By revealing the unique attributes of the
market better decisions can be made with regard to the market. Under this
question the unique attributes in terms of market structure and size will be
addressed. Of major importance are the changes in regulations and culture that
are influencing the luxury market. It is hard to imagine of a luxury market
without an accompanying change in the culture of the people.
iii.
What are the likely trends in the Chinese luxury car market?
Any
description and analysis of the market would be of little value if it cannot
offer insights on the likely trends that may occur in the future. The research
is not quantitative and will not focus on developing modes for market
estimation. However, the qualitative information about the market will offer
insights that can be used to make inferences on the possible trends in the
future. Some economic developments will be easy to deduce from the findings
while others may not. The prediction will be limited to what the information
got can allow. It is not likely that predictions can accurately tell what is
likely to turn out in the future. However, with general trends the business leaders
and policy makers may have the opportunity to improve their decision making to
benefit from the changes.
1.4 Purposes of the Research
The
significance of the research is centrally based on the research questions. By
answering the research questions the research will have the following
significance:
Reveal the strategic
positioning that best suits the Chinese luxury car market.
The
Chinese luxury car will definitely be the most valuable to all luxury car
manufacturers in the future. It is impossible to imagine of a luxury car
manufacturer in the future that will not be interested in venturing into China.
The success for each company will however depend on the strategic positioning
taken by the company. Currently BMW is the best brand because it has some
strategic positioning. This may change in the future due to several factors. By
analyzing the factors that affect the positioning of a luxury car brand in
China, it will be possible for the luxury car manufacturers to design their strategies
better and improve the knowledge on the major issues that may need to be
addressed.
Reveal the most important
characteristics of the Chinese luxury car consumer.
The
BMW has its unique attributes which must be attracting the Chinese luxury car
consumer more than for the other cars. The unique attributes that are important
to the Chinese luxury consumer are very important in determining the future
trend in the market. It will be easier for the manufacturers to concentrate on
the areas that interest the consumer most and therefore improve their markets. It is expected that the attributes will vary from
one consumer to another. However, with a common brand that is acceptable to
all, the general attributes can be identified.
Reveal the structure of the
Chinese luxury market.
The
Chinese luxury market has for a long time been suspected to be very different
from the luxury markets in other countries like the USA and Japan that have
well developed structural systems. This research will be significant in that it
will reveal the important structural differences in the market. The structural
difference will obviously affect the nature of luxury business in the country
not only for luxury cars but also for other major luxury products. The unique attributes are the most important
in the determination of the future trend of the luxury industry in China. The luxury
industry in China will affect the world economic trends immensely as many more people
become wealthy in the future.
Provide analysis of the
likely future trends of the luxury car business in China and the general luxury
industry.
The
analysis of the likely future trends will tie all the major factors identified
in the research together in to a coherent framework that can be used to inform
decisions for business people and policy makers as well as the consumers. The
trends will draw from the research as well as the past trends in the industry
which has been followed by many analysts due to its unique position in the
global economy.
1.5 Definition of Terms
Several
terms used in this research will have unique meanings or meanings that are more
specific. The following are the definitions of the terms whose application may
differ in one way or another from the conventional applications:
Luxury
Luxury
is a very fluid concept since it involves an element of subjectivity that
changes from one location to another or from one context to another. In this research
the term luxury will be used to refer to those sections of the market that involve
goods that are more identifiable with the extreme form of hedonism as opposed
to utility. Such goods attract high
premiums that are easily paid without clear association with additional use
value of the products
Hedonism
Hedonism is an ideology that emphasizes on the
pursuit pleasure as the main goal of life.
2.0 Literature Review
2.1 Luxury Markets
The
general trends observable in the luxury products markets are similar to those
experienced by the luxury car markets. Luxury markets have been around for a
long time and are actually an element of human civilization. There is no time
in the history of human civilization that there were no goods that were only
accessed by the few privileged in the society either due to political position
or wealth (Dittmar, 2008). The markets have evolved as human civilization went
through several phases and currently the luxury market is accessed through
wealth. The wealthy in the society are able to access these markets which do
not only trade the common high end goods but also exotic and designer items as
well as works of art. Most of the luxury products currently come from the
European market which has been traditionally the source of most of the designer
items. Many other products however come from other regions of the world and
almost each country produces something unique enough to qualify as a luxury
item (Dittmar, 2008). The Luxury car manufacturers mainly come from Europe,
Japan and the USA where some of the largest automobile manufacturers are based
(Adler, 2007). The markets are similarly situated in the developed world which
until recently catered for the largest volumes of sales globally. These trends
are however changing marginally with some of the emerging economies such as
China contributing significantly to the market for such luxury cars (KPMG, 2009).
Indeed the Asian region provides the largest market for luxury cars with Japan
being reputed as the largest consumer of luxury products including luxury cars
(KPMG, 2009). This dominant position is of course reinforced by China’s
influential entry into the luxury car markets. Other leading sources of luxury
car markets include the USA, Europe, and Canada. The global market for luxury
cars is observed to have taken a dip in the late 2000s as a result of the
global financial crisis which adversely affected the economies in most of the
developed world (Business Times, 2011). However, China having gone through the
downturn without suffering significant economic hindrances came out of the
recession strong and has continued to record a constant increase in the number
of middle-income citizens. The increase in the number of persons with the
capacity to afford luxury cars is believed to be the main reason behind the
growth of the luxury market and the increased interest of luxury car
manufactures to venture into the Chinese market (Busines Times, 2011).
Luxury
cars can broadly be described as vehicles that provide users with features that
are beyond the expectations of strict necessity (Adler, 2007). These additional
benefits are often provided in exchange for an additional cost. These
additional features may refer tangible features such as equipment, design
ingenuity, comfort, construction precision, and technological innovation
(Adler, 2007). The benefits may also be intangible and may include cachet or
prestige which is often a creation of deliberate efforts by the vehicle
producers to build a brand image associating the consumers of their products
with a certain social class, status, or a certain level of self actualization
(Adler, 2007). These luxurious provisions are usually factored into the car
designs after much consideration of the tastes and preferences of the targeted
customers: usually the wealth members of the societies. These special products
are then supplied for sale at a premium with their prices often higher than of
the basic necessity vehicles. Despite the great attention given to luxury
goods, little research has been dedicated to the investigation of the luxury
cars in specific. However, credible literature on the performance of luxury
brands on a global scale give significant insight on the historical and
contemporary performance of such markets.
With
increasing competition among auto dealers, the boundary between luxury brands
and basic brands is quickly blurring with the most significant aspects of class
being left to the brand image projected by such producers. Luxury cars come in
different designs and have different levels of acceptability in different
countries around the world. The main luxury car categories include the premium
compact cars, the compact executive cars, executive cars, full size luxury
cars, ultra luxury cars, and crossover cars (Adler, 2007). The premium compact
cars were launched by many European automakers in the mid 2000s and comprise
some of the least expensive models among the luxury lineups. The target market
for this category of cars is the young consumers with unique tastes. These
vehicles tend to be lighter, smaller, and more fuel efficient and include
brands such as the Audi A3, Lexus CT, BMW 1 Series, and Mercedes Benz B Class
(KPMG, 2009). The classifications are not uniformly applicable across the board
with slight differences observed among vehicle categories. For instance, the
Audi A3 and A4 brands are considered family cars and not luxury cars (Adler,
2007). This is in contrast with the classification in China, Japan, and the USA
(Adler, 2007). The premium compact cars tend to be slightly better than the
common market cars but a little lower than other up-market luxury cars. These vehicles
tend to have high quality interior materials, performance power-trains, and a
wide range of convenience features that set them apart from the common market
cars.
The
compact executive cars are also known as the entry level luxury cars (Anurit, J., Newman, K., and Chansarkar, 2010). These vehicles are often
smaller than most family sized cars. The distinguishing feature for these cars
is the rear-wheel drive feature with longitudinal engines that provide the cars
with improved stability and ease of handling. Some also contain the four-wheel
feature and higher performance engines. The additional features of this
category include high revolution engines, complicated independent suspensions,
and sportier transmissions. The special engines often require the use of
premium gasoline. The brands found under this category include the BMW 3
Series, Lexus IS, Mercedes Benz C Class, Volvo S60 and the Acura TSX among
others (Adler, 2007). These vehicles are however characterized by reduced
interior space and smaller trunks. These vehicles make up for some of the
largest volumes of sales for luxury brands. For instance, the BMW 3 Series
makes up for about 40% of all sales made by BMW globally (Business Times, 2011).
Executive cars or mid-luxury cars are usually positioned as premium vehicles
with higher levels of performance and technology facilities. These cars are
mid-sized and often as large as the large family cars. These vehicles also use
large longitudinal engines that require large engine spaces as is the case with
V8 engines. Their development and production costs therefore tend to be on the
higher side. The cars in this category include the BMW 5 Series, Volvo S80,
Jaguar XF, and the Mercedes Benz E Class among others (Adler, 2007).
The
full size luxury cars also known as the high end luxury cars are reputed with
having the latest automotive technology. They also contained enhanced features
and plenty of interior space. The most known brands in this category include
the BMW 7 Series, Audi A8, Jaguar XJ, Volkswagen Phaeton, and the Mercedes Benz
S Class among others (Adler, 2007). The Ultra Luxury cars are often
characterized with enhanced engines (V12) which offer greater smoothness and
refinement together with a myriad of luxury and technological features. The
brands most commonly found in this category include the Maserati, Maybach,
Aston Martin, Bentley, and Rolls Royce (Adler, 2007). The top range cars
produced by BMW, Audi, Mercedes and Jaguar are also often included in this
category albeit not without controversy.
The Crossover cars or the luxury SUV cars are a more recent development.
These cars include brands such as the BMW X6, BMW Spartanburg, Hummer, Land
Rover, Ford Expedition, Lexus LX, Lincoln Navigator, Lexus RX, and others
(Adler, 2007).
2.3 Chinese Luxury Consumers
Luxury
cars in China are largely a preserve of the wealthy who tend to have the will
and the means to access premium products at a premium. The Chinese luxury
market is not very old and has a history of less than 20 years. The country being
closed to the global economy remained with low income and the communist policies
limited the amount of individual wealth critically limiting the development of
the luxury market. However, since the 1990s the country opened its economy to
the world and started reducing restrictions on personal wealth. Since then the
income level of the country’s population has increased tremendously and as a
consequence spurring the luxury industry. As of 2010 it was estimated that the
country had over 300,000 millionaires in dollar terms (Monash University
Business and Economics, 2007). Although the fraction of the wealthy is still
small compared to the total population of about 1.3 billion people, it captures
the magnitude which is the most distinctive trait of the Chinese economy. The
population of those who are now accessing the luxury markets can be grouped
into several categories as follows:
2.3.1
Traditional Business Class
The
traditional business class represents the oldest part of the Chinese population
that has been able to access the luxury market. This class comprise of the
original aristocrats who were able to convert themselves into business magnates.
This section of the population has always had the wealth to be able to access
the luxury market (Sang, 2006). However, it was
limited previously by the availability. The class is of old people between the
age 40 yrs and 70 yrs and has the highest volume of assets. The main items that
attract this class are the vehicles and other exotic items. This group is widely travelled and as a consequence
knows the distinctions between the luxury brands, they have their personal tastes
and usually use a small proportion of their wealth to access the luxury market
(Lu, 2008). This group of consumers is slowly dwindling both in absolute
numbers and also as a proportion of the total population that is able to access
the luxury markets. Most of the purchases by this group have been done in
foreign markets due to the challenge of counterfeits in the local markets.
However, in recent past the foreign markets purchases have reduced as the
foreign companies increase their presence in the domestic market (Fitzmaurice
and Comegys, 2006).
The
traditional business class is not expected to increase their purchase of the
luxury items. However since they are fast aging and their wealth is being
inherited by younger generations it is expected that a greater proportion of
their wealth will be used in the luxury market in the future. The original
Chinese culture of saving is still predominant in this class which might explain
the low proportion of wealth used in the luxury markets. BMW has a very big market in this group of
consumers who like being distinctive and making their social class felt.
2.3.2
New Luxury Shoppers
The
new luxury shoppers represent the biggest and the fastest growing class of
luxury consumers in China. This group
represents the modern working people who have experienced the sharp increase in
personal wealth. This group mainly focuses on the designer items such as watches,
clothing and shoes. This group has revolutionized the whole of the Chinese
luxury market (Chadha and Husband, 2006). In the last 10 years the country has
seen rapid growth in local luxury good’s outlets which are now converting into
shopping malls. These malls are very attractive to the new shoppers. The most
interesting characteristic about this group is that it does not have strong
brand loyalty. Since they have just ventured into the luxury market the tastes
are not fully developed which leads to brand switching. In a study by TNS (2005)
it was revealed that this group is willing to switch from one brand to another
if the friends and family thinks the newer brand is better. Another
characteristic of this group is that it has the capacity to mix some cheap
brands with the expensive luxury brands. This indicates that this group is yet to
mature fully as luxury consumers and mostly driven by the new found wealth. The
group shops mostly for status symbols and gift items such as watches and
outfits. In the research by TNS the group indicated that the major drive in the
purchases of the luxury items is to reward themselves for their hard work
(Chadha and Husband, 2006). This was found to be the case for most of the
shoppers who preferred items that can be used as gifs such as clothing and
watches. Another part of the group indicated that the luxury items were to
represents their success and hard work and give them the position they desire
in the society.
The
main characteristic of the group is the fast growth. This group is going to
represent the largest group of luxury goods consumers in the world in the next
few years. The group is relatively young compared to the traditional business
class. The majority of the group is aged between 20 and 40 years. This group
has slowed down on the traditional Chinese culture of frugal spending and
saving. As a result the group spends a higher proportion of their incomes on
the luxury items than the traditional business class. They are very optimistic
people and have a positive outlook about the future. Although the group is not majorly into luxury
cars it is expected that the trend will catch up in the near future leading to
even better growth for the luxury car manufacturers in the country.
The
group is also more open to western cultures and is the greatest contributor to
the domestic market since they are comfortable shopping in the domestic markets
for their products unlike the business class which may go aboard for the same
purchases.
2.3.3
Empowered Women
China
for a long time has remained a chauvinistic society. In 2004 it was estimated
that every three out of four purchases were made by men. The men have remained
in control of the economic wealth for a long time. This trend is however changing
slowly. With the development of industries that do not discriminate between men
and women in the employment policies, women have gained more economic power and
as result they have ventured into the luxury market strongly. The empowerment
of women economically has seen an influx of women in the luxury market
especially of items such as clothing and shoes. Women however still retain the
traditional Chinese culture of saving (Chadha and Husband, 2006). The empowered
women are moderates since the majority of them are young and have grown in the
era of economic transformation. Their openness to western cultures have made
them more receptive to the clothing styles of western culture and as a
consequence spend a higher proportion of their wealth on the luxury items as
compared to the traditional business class. This group is growing fast too like
the new shoppers. Powered by the fast economic growth they have a more
optimistic outlook of the future and do not have much problem shopping locally.
It is expected that this group will also be joining the luxury car market strongly
as the status in society become more and more important.
The
group does not display strong brand loyalty (Croll, 2006). This is
characteristic of markets that are new to the luxury products and that are
easily influenced by friends and family. They show strong mix in brands usage indicating
that their tastes are still developing. The group is growing just as fast as the new
shoppers and is a critical part of the entire market.
2.3.4
Little Emperors
Little
emperors are the most unique members of the luxury consumer bracket in China.
The most important characteristic of this group is that it is very young mostly
in their teenage or early adulthood and have a lot of resources at their
disposal. This group is the first generation of the one child policy that was
instituted by the government of China (Croll, 2006). In areas around urban
areas where the policy was keenly observed the effect is more obvious. Born in
very small families and with all the other members of the family having past
the fast consumption age the single children are finding themselves with a lot
of resources at their disposal. Consequently the group goes into the luxury
market to fulfill their urges of being distinctive and also to utilize the resources
available. With the future secure, the only way this group can be able to
expend their wealth is through luxury purchases.
The
TNS research observed that more than half of the resources of the urban families
with only one child were being used on the child or by the child. The research
also discovered that the sources of income for this group are many. Although the
generation is yet to fully be incorporated into the working class. The parents
and the grandparents are actively contributing to the upkeep of these young
generations making them have six sources of income. Due to the control exercised by the parents
the group spends a smaller proportion of the wealth at their disposal on luxury
items. This is however expected to change greatly as the wealth is fully transferred
to the young generation. The group is also increasing very fast. As more
families adopt one child policy not as a result of government regulation but to
make it possible to extend the working period, the group of young emperors get
new recruits expanding their number. This group is expected to shift their
spending very significantly in the future as they posses very little of the traditional
values of saving.
The
group is very optimistic about the future and is very exploratory in their
purchases. The group is expected to venture strongly into the luxury car
market.
As
the analysis of the various market participants indicates, China is already
very interesting in the categories of the participants. Other markets usually
have homogenous participants in the luxury markets who are mainly from the
wealthy class. There is not much stratification with different dynamics. What
the analysis of the markets participants indicates is that the Chinese market cannot
be expected to follow the traditional paths of development as other developed
luxury markets. Each group has its own characteristics and carries slightly
different elements of culture. The implication is that the market will remain
very unpredictable but the growth is likely to remain very strong.
Business
and policy makers will therefore have to analyze the market carefully without
making major assumptions to identify the best approaches for each group. It is
also likely that different companies will target different groups in the market.
2.4 Challenges
The
Chinese luxury market has many challenges as the previous researches indicate.
However, these challenges have not been able to limit the rate of growth. The
main challenges in the market are as follows:
2.4.1
Regulations
The
regulations in China from the beginning were against the hedonic economic
model. The Chinese government charges very high taxes on luxury products and
does not support their development in China. The regulations allow only the
minimum operations. As a consequence the market has grown at a slower rate than
it would otherwise have grown. Due to taxes the luxury items in China can be up
to 30% more expensive than similar products in other markets such as European
markets where the taxes are lower (Doctoroff, 2005). The effect of the
regulations is to encourage foreign purchases. The wealthy sometimes travel
abroad to make their purchases to avoid the high cost due to taxes. However,
the trend has been decreasing with more consumers opting to purchase locally as
the restrictions ease out.
The
government through local authorities has also imposed quotas on several items.
In Beijing for example a quota on the registration of new motor vehicles was
imposed in an attempt to unclog the city streets. All the other tier one cities
have similar regulations. These kinds of regulations have the ability to limit
the growth of the luxury market for BMW and other cars since most of the
purchasers of these vehicles are in the rich tier one city.
In
another drastic measure to limit the high consumption of luxury goods the
cities have banned the advertisements that are seen as promoting hedonic tendencies
(Leung, 2008). The authorities have cited the incompatibility of this
consumption behavior with the traditional approach of saving. The market
observers however argue that the ban on advertisements will not necessarily
lower the rate of market growth. Luxury consumers usually search for the brands
that they want without the necessity of an advertisement (Li and Su, 2007). It
has also been observed that advertisement only affects the market shares of the
competitors rather than the overall market. This may have an effect on BMW and
other luxury car sellers in China in the next few years as the ban come to
effect.
The
trend indicates easing of the regulations towards business activities. With
China now being a member of the WTO it is expected that the trade policies
between it and other countries will improve a fact that will further promote
the luxury market (Doctoroff, 2005).
2.4.2
Counterfeits
China
remains the only country with very high levels of counterfeiting. The
government and business leaders have acknowledged existence of the problem and
policies have been instituted to try and curb the behavior. Counterfeiting has
very drastic effects to the luxury market. The purchase of a luxury item is
mostly based on its authenticity. Once the authenticity of a luxury item cannot
be guaranteed the item looses almost all of its value (China Quality
Certification Centre, 2010). It is
estimated that about 20% of all consumer goods in China are counterfeit. Local
companies also complain of counterfeit. The Chinese luxury market is definitely
being affected by the counterfeit goods and the richest of the population are
more likely to shop elsewhere to avoid the risk of buying a counterfeit
commodity (Stockman, 2000). This has the ability to slow down the rate of
market growth. In the recent past however,
the effect of counterfeit has been very minimal. As the market matures and tastes
improve, this is not likely to be sustainable. Unless the government comes up
with better measures to curb counterfeiting the luxury market is likely to
suffer.
The
positive condition in the market is that some of the products are very hard or
expensive to counterfeit. The luxury cars market is one that is not easily affected
by counterfeiting due to the complexity of the product and the cost involved.
BMW is therefore likely to remain competitive in the market despite the
counterfeit problem. The market for luxury cars is therefore likely to grow faster
than for the other items that are easily counterfeited.
2.4.3
Culture
The
Chinese culture also has an influence on the development of the luxury market whose
main effect has been to slow down the market. The traditional Chinese culture
has been based on hard work and saving. Saving does not go well with the luxury
markets (Leung, 2008). Luxury markets are fostered by a culture of consumerism
like the one that has dominated the west for the last several decades. The Chinese
are mostly influenced by the personal touch more than the material wellbeing.
In advertisement for example the luxury businesses have not been able to use
the normal advertisement channels where the product is marketed separate from the
people (Doctoroff, 2005). The Chinese responds more to human faces. The
marketing has therefore been very tricky for the business. Use of iconic
celebrities with world acclaim have however started to have positive responses
as the culture slowly changes to appreciated western cultures. The luxury industry
will therefore have to overcome the culture of frugality and saving that is
very popular in China. The hope lies with the young generation which is more open
to western cultures.
As
the literature indicates the Chinese luxury market is very unique and has many
factors that make it an interesting case study. The literature indicates that
there have been several in depths analysis of the luxury market in China. However,
the researches that have been done so far have focused on the market in
general. The general approach may not show some important trends in some economic
segments that may have significant impacts in the future. The development of
the luxury car market in particular has not been adequately addressed by the previous
research work. This is partly due to the fact that the market is new and also
due to the attractiveness of the general trends. No previous researches have been
able to dedicate enough effort to analyze the possible implications of these
unique factors to the market. This research therefore has its place in the
development of knowledge on the Chinese luxury market.
3.0 Methodology
3.1 Introduction
The research methodology provides the guidance on the
approach to the research as well as the guiding philosophies to be embraced
when conducting the study (DeMarrais, Kathleen and Lapan, 2004). The choice of
methodology is mainly influenced by the nature of the study being undertaken. There
exist many methodologies that can be adopted to perform this kind of research.
However, the nature of research requires some modifications so that all the
issues can be addressed. The striking feature of this study is that it requires
the application of qualitative methodologies only. The research is focused on
identifying the nature of the Chinese luxury market which is highly qualitative.
Although there are quantitative elements in the market, they are driven by the qualitative
factors. By analyzing the qualitative elements it would be possible to develop
a better understanding of the quantitative elements and reveal areas that would
be candidates for a quantitative analysis (DeMarrais, Kathleen and Lapan, 2004).
The methodology also adopts techniques from several types of research that are
in line with the scientific research model. This is aimed at capturing the
essential aspects of the market. The
following sections describe the specific techniques that were adopted for this
research
3.2 Research Design
Research design provides the basic guidelines to be
embraced to ensure that the research questions are answered satisfactorily (Gray,
2004). The questions of the research seek to identify the actual nature of the
Chinese luxury market with special emphasis on the luxury car market. The
questions there lead to the development of a descriptive research design. Descriptive
research aims at describing the actual phenomena as it is. The research
therefore focused on describing the luxury market in China and the market for
BMW as a luxury car. Descriptive research is appropriate for this research
since there exist ways in which reliable data can be gathered o the market (Gray,
2004). This is unlike the use of exploratory data which is applicable in areas
where there is very little understanding on the main issue (Gray, 2004). Several
studies have been done by reliable agencies and their synthesis also forms a
major part of this research. The Chinese
luxury market as the literature indicated is very unique from the other luxury
markets in the world. Adoption of other research designs that would necessitate
the development of prediction models would therefore mask the uniqueness of the
market and produce very unreliable results. Since the knowledge on the market
is still developing, the descriptive research design offers the best opportunity
to improve the existing knowledge. Once adequate description of the market is
developed, predictive models would then be applicable facilitating further
analysis of the market through models.
The uniqueness of this research is determined by the
fact that it required immense cooperation between the researcher and BMW due to
the fact that their participation was absolutely necessary in ensuring that the
questionnaires were effectively administered to their clients. Permission to
conduct the research was sought from the organization’s marketing manager who
pledged cooperation on the ground that the research would be expected to
provide BMW with information relevant to their marketing and branding
decisions. Physical visits to the organization were made and permission granted
after lengthy discussions on the nature and scope of the research. This
permission was granted subject to the requirement that all interviewees be
provided with an informed consent form and with the commitment that the
researcher would take reasonable caution to ensure that sensitive information
would not be made available to unauthorized persons.
3.3 Data Sources
Sufficient data is required to develop and adequate
and reliably adequate description of the Chinese luxury market. In this
research several data sources was required. The research questions required
comprehensive data on the various areas for the research objective to be achieved.
Primary as well as secondary data were required for the research. The data sources
are mainly guided by the research design and the research questions. The
following data sources were utilized:
Primary Data Sources
Primary data sources are critical in this research
since the Chinese market is changing very rapidly. Primary data provides the
research with the benefit of capturing the current trends in the market unlike
secondary data that only provide information based on the time that such
information was collected (Creswell, 1997). As Creswell (1997) observes, secondary
data, unlike primary data, cannot sufficiently capture prevailing opinions and
market trends effectively. Primary research focused on the areas of the research
that require specific information. The first question of the research requires
an understanding of the strategic positioning of the BMW brand in the Chinese
market. To gather data to answer this question interviews were conducted with
the BMW staff in China. The interviews focused on the business development
manager who has been responsible for the development of the Chinese market. The
interviews were conducted over the telephone to minimize the expenses involved.
The second research question that focused on the unique attributes of the BMW
brand that set it apart from the other luxury brands. The answer to this
question would only have been reflective of the current perceptions due to the
dynamic nature of primary data. The same applied to the third question which
focused on bringing out the unique attributes that the Chinese market value.
The best source of data to answer this question is therefore primary sources.
The primary sources of data are especially appropriate for this research due to
the following reasons:
i.
They provide unbiased
information about the key issues (Creswell, 1997). The luxury market is one
that is characterized by strong sentiments. The decisions are usually made on
irrational and sometimes cultural basis. Any data collected by another party is
likely to be influenced by the strong sentiments and therefore reduce the credibility
of the research (Creswell, 1997).
ii.
The market is changing very
rapidly. In a span of one year significant changes may have occurred in the
market that would make data collected from previous periods irrelevant or
misleading. BMW for example changes its marketing strategy continuously to beat
the competition. An analysis on secondary data would therefore not provide an
accurate description of the market as it is.
Secondary Data
The use of secondary data is crucial in any research
for the purposes of including insights necessary for the purposes of
establishing conceptual underpinnings for the research (DeMarrais, Kathleen and
Lapan, 2004). Secondary research also allows the researcher to make accurate
analysis of the data collected using historical and contemporary developments
of events outside the scope of the study. Secondary research was therefore
incorporated into the study (DeMarrais, Kathleen and Lapan, 2004). To achieve
the overall research objectives it is necessary to identify the unique
attributes of the Chinese luxury market. One of the unique attributes revealed
by the literature on other research work is that the market is very big. This
makes it very difficult and expensive to use primary data sources to answer the
question. The resources and time available may not allow for primary data
collection on the whole market focusing on many attributes. Secondary data
sources were sought to answer the question. There exist several research firms
that have been monitoring the market and that have carried out in-depth
analysis of the whole market. These formed the main data source for the
attributes of the market. Since the focus is on general trends the information
is likely to be available in published materials. There is also a research
question that focuses on the identification of the general trends in the market
that may offer insights on the future trends. Trend since the market are best
observed over time. To answer this question adequately data over several
periods in the past is required. This kind of information is not possible to
collect from primary sources. The secondary source exists on data about the
market for the past several years. This information offers the best opportunity
to analyze the trends that have been observed in the pats. The use of secondary
data sources is appropriate for this research due to the following reasons:
i.
They offer the opportunity to
minimize expense on the research while still accessing information on the major
areas of the research such as the market attributes and trends which would be almost
impossible to analyses using primary data sources (Gray, 2004).
ii.
The secondary data sources also
helps achieve the objectives of synthesizing the available data in light of he
market information revealed through the primary data sources (DeMarrais, Kathleen
and Lapan, 2004). The purpose of the research lies in the connection of the
existing knowledge on the Chinese luxury market and the knowledge developed from
the research. The use of secondary data will provide the opportunity for such
synthesis.
3.4 Sampling
The rationale for sampling is often based on the fact
that the resources and time available for researchers is often limited and
seldom allows for collection of data from an unlimited number of sources (Gray,
2004). Sampling therefore enables a researcher to capture the views of the
targeted source by simply focusing on a representative fraction of the whole.
Given the limited resources available for this research, a modest sample size
of 50 interviewees was chosen. In addition to this, a sample of 100 customers
was also chosen. These customers would be engaged through the use of
questionnaires. This made the total sample size to be 150. This choice was
based on the fact that it would be impossible to interview the total population
of over 1000 employees at BMW. The sampling technique to be applied is random sampling.
This sampling technique is mostly used where the population is homogenous
meaning that the population is not divided into segments with distinct
characteristics (DeMarrais, Kathleen and Lapan, 2004). It provides the
advantage of objectivity where the researcher’s bias towards the inclusion of
certain persons into the sample is eliminated.
3.5 Data Collection and Recording
Data collection and recording is critical in the collection
of the primary data for the research. As outlined in the data sources section
of the methodology an interviews were used to collect data on the strategic
positioning of the BMW brand in China. Interviews as a method of data
collection provides the researcher with the advantage of ensuring the accuracy
of the information collected through the making and seeking of clarifications
as appropriate (DeMarrais, Kathleen and Lapan, 2004). The use of interviews
also enable researchers to determine the quality of information gathered by
taking note of the non verbal communication cues provided by the interviewees
helping the researcher to know the level of insight the interviewees have on
the subject matter (DeMarrais, Kathleen and Lapan, 2004). Interviews are
however expected to face a number of challenges including the risk of diverting
from the main issues. This limitation will be addressed by the preparation of
an interview guideline that will indicate the areas to be covered in the research.
The collection of data from the sample of customers was
through a structured questionnaire. The questionnaire focused required the
respondents to list down the attributes that make the BMW unique and attractive
to them. The questionnaire also provided the respondents with a chance to give
comments on the attributes of the brands and the luxury market for cars in
general. The questionnaires were distributed online through collaboration with
BMW. BMW has an interactive website that offers the consumers a chance to view
and evaluated the specifications of the vehicles. By collaborating with the
company the questionnaire will be issued to the customers visiting the website
and will be short not to discourage the customers from filling it. The data was
collected as soon as the respondent completes filling the questionnaire. This
information was made available to BMW so that they can also benefit from the
knowledge on the views of their customers and to motivate them to participate.
Data collection for the secondary data involved less complex
techniques. All the data available and relevant to the topic was gathered and
then sorted depending on the area of research addressed. Only the data source with
the most relevant information and from credible sources was be used.
3.6 Data Analysis and Presentation
Data analysis revolved around the questions of the research
the analysis involved the identification of the attributes and insights
required to answer the research questions. The primary data was aggregated and
some statistical techniques applied to identify the major attributes listed by
the customers. The comments given were used to support the discussion. The analysis
of secondary data involved identification of the general trends. The trends
found in most of the source were adopted as the main trends. Explanations were
also offered on the areas that posed limitations. It is possible that the data
required to answer the questions adequately may not be available.
3.7 Ethical Considerations
Every research has ethical considerations because the
information developed will be used by several parties. In this research care has
been taken not to disclose any information that may be against the agreements
entered with the respondents and other facilitators. Care has also been taken
to ensure that no information that is likely to be unethical from the
scientific perspective is used. While care has been taken to conform to the ethical
expectations of the users of the information, only objective information will
be sued in line with scientific research.
4.0 Results and Discussion
The data collection was successful and very data
sources provided adequate data for the conclusion of the research. The
interview with BMW business development manager in China was secured in good
time. The only limitation that was experienced in the conduct of the interview
is that the manager was not able to disclose all the information that was
required for competition purposes; however the information given was adequate
to develop a description of BMW strategic positioning in China. BMW was
supportive in the conduct of the research using the questionnaires. In
collaboration with the marketing department 100 questionnaire were issued to
the customers visiting the company’s website. Of the questionnaires sent 79
were returned fully completed. This represents a reasonable level of success. The
secondary data was also available from recent source that provided the
information necessary to complete the research. The findings were as follows:
BMW strategic
positioning in China
The interview with the business development manager
in BMW resulted in several aspects of the competitive positioning in the
Chinese luxury markets. The major issue so strategic positioning that the
manager identifies are as follows
Distinctiveness
Distinctiveness was highlighted as the major issue in
strategic positioning for competitive advantage. The manager indicated that for
any luxury good to be successful in the market it must be very distinct from
the others in ways that the consumers are able to identify. This finding is in
line with the literature. In the purchase of luxury goods consumers are looking
for a chance to stand out. Therefore the more distinct the product the better
it is. The manager also disclosed that BMW is like no other luxury car in almost
all its appearances and functionality. This achieved through constant
innovation and the use of market surveys to develop and understanding of the preferences
of the customers.
Focus on Power
The manager also revealed that the Chinese people are
intoxicated by power. The more powerful the machine appears the better. Power
was majorly represented by the male population in China. With the steady
collapse of the aristocratic society where power was conferred by cultural
privileged, power has now to be sought through other means. One of them is
through the use of status symbols. BMW is mainly made to reflect power in the person
using it and BMW endeavors to communicate this to the customers. As a
consequence the brand has become very popular with the Chinese population. This
confirms the view that a majority of the spenders currently are male.
Change of
Culture
The manager also stated that the company has been
capitalizing on the change sin culture. The main emphasis now is that life
should be enjoyed. The company ahs always anticipated the change on culture
with the increase in average income (Sun et al.
2004). The manger stated that the company came
into the country when the market was still not receptive of the western
consumerism culture; this was strategic since the company new with increasing
income the culture will change slowly to adapt consumerism which will lead to
the adoption of products that represents exactly that. BMW is modeled to give
mobility and luxury to individuals.
Publication
Events
The company ahs also engaged in many publication
events. The manager pointed out that the best way to succeed in China is to make
the people aware of your existence. The market has remained closed to the world
economy for a long time and majorities of the people are not aware of the existence
of some of the products. With increased interactions in the country an improvement
in information technology, the company ahs used various techniques to improve
the awareness of its products. Currently the manager observes that there are
more people searching for the company information through the internet it was
previously. As a consequence the company ahs developed very interactive
websites to provide the taste of the product to the consumer. Public awareness
events also used especially now that advertisement in major towns has been
restricted.
Focus on
Information
The manager revealed that the most critical part of
the BMW positioning in the Chinese market is based on information. He indicated
that however powerful the vehicle was and elegant in style the consumers will
never know it until it is disclosed to them. The passing of the information
about the functionality of the vehicle has been central to the product
development. The internet ahs provided the company with immense opportunities
to provide detailed information and audiovisual sense of the company
specifications. The publicity events are also aimed at improving the quality of
information the consumers receive about the product. The greatest advantage the
company has is that most of the consumers who are likely to buy a luxury car
have access to the internet and other information sources like TV. The major
limitation is that information is highly censored in China as pointed out by
the manager.
Questionnaire
Results
The questionnaire also revealed interesting
information about the attributes the consumers admire in the BMW brand. It is
remarkable how close the attributes are to the issues addressed by the business
development manager in BMW.
Power
All the respondents indicated that the power of the
vehicle is the most outstanding attribute of the vehicle. In China the
population accessing the luxury car is highly interested in power. This is in
line with the literature which indicates that a majority of them are men who
would culturally be interested in power. The customers indicated that power was
represented by the appearance of the car as well as its functionality (Vigneron and
Johnson, 2004). The customers also revealed that they
would be willing to pay a premium on the car if the power was raised even
higher. The overlap between the BMW business development manager and the customers’
view of the vehicle also reveals another aspect of market positioning for the
BMW brand. The company has been able to align its propositions about the car
with those of the customers.
Elegance
All the respondents also disclosed that elegance was
a major attribute of the BMW brand. The brand is mainly marketed to the high
end consumer segment where style means a lot. This is line with the literature
on luxury markets. The luxury market is characterized by a deep sense of style.
Anything that represents style is desirable to the market. BMW emphasizes on
style and elegance just as much as it emphasis on performance. This is also another
are where the customers view about the vehicle merge with those of the company.
BMW has several designs of the personal car all aimed at capturing the elegance
desired by the various groups of luxury car consumers.
Quality
As expected of any strong bard, the customers surveyed
indicated that the brand represented quality. They cited the long history of
the brand and the success of the brand in other markets as the guarantee for
quality. All the respondents who filled the questionnaire indicated that quality
was discernible from the craftsmanship employed in the design of the car. They
also cited durability of the car as indicating the high quality of the car.
Literature indicated that quality is desirable in the luxury market. The permanency
represented by the brand is very captivating for the consumers in the luxury
market.
Authenticity
The brand was also identified as authentic. BMW
operates its own distribution channels in the country in partnership with some
other local distributors. The customers stated that the direct contact with the
company gives them the sense of authenticity desired. Authenticity is very critical
in the luxury market. For easily counterfeited goods it can lead to complete
loss of value. For goods like motor vehicles it seems that authenticity can be
doubted if the original company is not involved. The consumers showed that they
preferred dealing with the producer of the good directly.
The questionnaire also provided the respondents with
an opportunity to provide information on the areas that they would like to see
improved in the provision of the products. Figure 1 below indicates the core of
the major issue that the customers pointed out.
Figure 1 Areas of Improvement
The figure indicates that good customer relations management
s the most important aspect to the customers. Actually all the major issues
that cored more than 50% in the survey were related to the customer management
style of the company. This behavior is very characteristic of the luxury market
which indicates that the Chinese luxury market has some level of similarity
with other luxury markets. The behavior may be more emphasized in China due to
the unique culture that emphasizes on the contact with the person (De Mooij, 2005). The literature indicated that advertisements were more effective
if they used people faces as opposed to just the products and some other elements
of elegance and consumerism.
The following sections are the result on the
secondary data analysis.
Unique
Attributes of Chinese Luxury Market
The unique market attributes in China were identified
as some of the most important issues to companies and policy makers in the
industry. The following are the major issues
that the secondary materials highlighted.
Growth
Growth was the most remarkable attribute of the
Chinese market for luxury products. BMW alone had managed to achieve growths of
up 70% in one year. De Mooij (2005) pointed out that
although there were difficulties penetrating the Chinese luxury market, once in
the market, the companies were spreading like wild fires. This captures the
real nature of growth in the country luxury market. Figure 2 below indicates the nature of growth
that has been witnessed in the last three years. As the figure shows, the
greatest growth occurred in with the new customers. The growth is accelerating
according to the figure. From 2009 to 2009 the growth rate accelerated from 7.7%
to 10.7%. Even the growth in the overall economy is not accelerating that fast.
This reveals a catching up effect in the Chinese luxury market.
Figure 2 China Luxury Market Growths
Source: Bain Survey of Luxury Goods Consumers in
Mainland China
(2009: n=1,410; 2010: n=1,471); Expert Interviews;
Brand Interviews; Customer Interviews; Analyst Reports; Company Reports; Literature
Search; Bain Analysis
The literature had indicated that the newly wealthy
the empowered women and the young emperors who are the major customers in the luxury
market in China are increasing from year to year. Owner, the acceleration
indicates that the middle income group that did not have a taste for the luxury
products is now catching up fast.
Size
The size of the market is also another major aspect
of the Chinese luxury market that set it apart from the other luxury markets in
the world. The number of people involved
is by far the greatest number in the world. The middle income group is
estimated at 250 million people. This is already more than the entire
populations of many countries in the world. This group is believed to be
developing taste for the luxury products. If the whole group is recruited into
the luxury consumption segment, then it will be by far the biggest group by
volume and also by value (Larenaudie, 2005). This will be
ahead of Japan and the United States.
Changing
Culture
The fast change in culture is also unique to China. While
all the other countries that have a vibrant luxury market have developed
steadily in culture, in China the culture change is occurring dramatically and within
only one generation. This fast pace in the change of culture indicates tat the
market is highly unpredictable (Wiedman et al, 2007). The
traditional culture of constant saving is being rapidly replaced by a culture
of enjoyment of life in the moment. This change in culture is associated with change
sin information technology that has enable many of the Chinese to access
information on western lifestyles and also the fast economic growth. The fast growth
is giving the people optimism and some sense of security about the future
reducing the need to withhold current expenditure.
Likely Trend
in the Future
The research also focused on the likely trends in the
future. The following trends have emerged as important.
Accelerated
Growth
The market is likely to accelerate in the near
future. Although in the very long term the market is expected to stabilize like
in the developed countries, the conditions might be very different by then to
cause other changes. The population is still so high and a majority of it is
still not able to access the luxury market (Yu, 1996). With the rapid growth in income in the whole country, the
population will join the luxury market at an accelerating rate. The newly
wealthy will also change their brands constantly before developing permanent
tastes promoting the growth.
Huge Market in
the Middle Income Group
The luxury market in most of the developed countries
sis usually limited to the high income families and the extreme wealthy. In
China, the trend indicates that the middle income families are also very active
in the luxury market. The market for small items such as shoes, watches and jewelry
is attracting the middle income group in China than in any other country (Luo, 2008). The implication is that the participants will have to develop strategies
to cover the huge middle income and develop products that may be accessible to
the middle income and not to the high income people only. The trend is also interesting. The Chinese
people seem to be increasingly buying luxury items for gifts as opposed to
personal consumption as in the developed country luxury markets. This is shown
by the trend in the last 3 years by Figure 3 below.
Figure 3 Gifting and Personal Consumption
Source: Bain Survey of Luxury Goods Consumers in
Mainland China (2009: n=1,410; 2010: n=1,471); Expert Interviews; Brand
Interviews; Customer Interviews; Analyst Reports; Company Reports; Literature
Search; Bain Analysis
In the year 2010 the volume of the purchase that went
to gifts was higher than in 2009, the rate also increased from 2009 to 2010 compared
to the rate between 2008 and 2009. This is an interesting trend which shows
that the Chinese culture may still have some influence in the development of
the luxury market in China. Personal relationships are valued in China more
than in other capitalistic countries such as the United States and European
countries. When the purchase of gifts comprises a huge proportion of the luxury
market, then businesses will have to adjust their strategic to provide more
gift items.
The sources of information for the Chinese people in
the luxury industry also have an important trend. Information was identified by
the BMW manager and the survey as one of the most important aspects of the
luxury industry. The quality of information received and the ease of access has
the potential to impact on the market substantially. Figure 4 below shows that
the Magazines still form the greatest source of information for the Chinese luxury
consumer. However, the most interesting phenomena are the changes occurring in
the industry. As the red box highlights there has been a jump in the use of
internet in the last 3 years, which indicates that the Internet is becoming
more and more important in the Chinese luxury market.
Figure 4 Sources of Information
Source: Bain Survey of Luxury Goods Consumers in
Mainland China
5.0 Conclusion
China represents one of
the most interesting markets in the world today. The nature and size of the
market is compounded by its growth to make it the greatest source of change in
the world economy currently and all indications point to even more changes in
the future. On of the industries have
witnessed dramatic changes is the luxury industry. China remained closed to the
rest of the world for a long time due to its communist economic polices. This
has been changing steadily in the last two decades and as result some
developments have been witnessed in the Chinese luxury market. In 2010, it was
discovered that the most celebrated brand in the country was BMW, a luxury car
brand from Germany. This indicated that market was not only maturing but it was
fast catching up with western consumerism. This research sought to answer three
questions: What is the strategic positioning of BMW in China? What are the unique
attributes of the Chinese luxury market? And what are the likely trends in the
Chinese luxury car market? BMW stands as the strongest brand in the Chinese
luxury car market with its sales volumes expected to continue on a steady rise
in the next few years. BMW has been able to distinguish itself as a major
player in the industry through its success in projecting its brand through
distinctiveness, power, authenticity, quality and elegance. These aspects had been identified in theory as being critical in the
luxury market. The overlap between the attributes listed by the customers and
the aspects focused on by BMW showed that the companies has been able to achieve
success through the alignment of its policies with the market conditions in the
Chinese luxury market.
The Chinese luxury car
market continues to intrigue analysts with indications revealing that a rapidly
expanding middle class has been the force behind the growing demand for luxury
cars. The market is known to have grown at average rate of 7.5% between 2008
and 2010 with predictions that the growth rate would surpass the 12% mark in
subsequent years buoyed by the incremental effect of changing tastes and
preferences as well as a steadily growing economy that has resulted in the
emergence of a wealthy middle class. The future of the Chinese luxury car
market is expected to be influenced by its accelerated growth and a huge middle
income customer base. The sources of information for the luxury consumers are
also changing with the internet having the fastest growth. These indicators only serve to reinforce the
predictions that the Chinese luxury car market remains on a steady growth and
is expected to continue growing at a rate of not less than 20% in over the next
5 years (Business Times, 2011). This presents the manufacturers of such cars
such as the BMW with the opportunity to expand enhance their performance
accordingly. China is said to have the potential of being the largest market
for such products and is bound to become the centre of activity for the
manufacturers of luxury car brands.
For more theory and case studies on: http://expertresearchers.blogspot.com/
For more theory and case studies on: http://expertresearchers.blogspot.com/
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