Gm Saturn Case Study

?How (whether) to revive a faltering brand after impressive initial success in early 90s. ?How to regain competitive advantage after loss of momentum, and failure of initial business strategies to sustain long-term sales growth. ?How to penetrate wider demographics (younger, male) ? How (whether) to penetrate foreign market Key findings: Environmental/General ?Saturn developed by GM as a separate brand and independent subsidiary in the late ? 80s, to deal with shrinking domestic market share for passenger cars: ? from 44% to 33% between ’85 and ’90

?42% of buyers didn’t even consider buying GM ?Main competition were compact Japanese cars, due to perceived higher quality and value. ?Factory was established in Spring Hill, TN, to isolate from Detroit mentality ? Key strategy to ensure quality: maintain good labor/management relations through cooperation with UAW in all aspects of business. Key findings: Product Strategy ?Initial concept: Compact, high-quality cars: ?SC1, SC2 coupes ?SL1, SL2 sedans ?Technology innovation, e. g. plastic bodies ?Target Market: ?Demographics: baby boomers, college educated, 25-49

?Sell 80% to “Converts” (wouldn’t otherwise buy GM) ?Larger vehicles were added later: ?SW1, SW2 station wagons (1993) ?L-Series mid-size sedan and station-wagon (1999) ?VUE SUV (2001) Key findings: Promotion Strategy ?Unique, “folksy”, “straight-talk”, $100M+ consumer ad campaign, building a focused brand image, using themes such as: ? Saturn employees’ enthusiasm, and dedication to building cars “in a brand new way” with US can-do spirit. ?Saturn buyers’ lifestyles, playing up baby boomer themes of utility, value and safety.

?Brand focus strengthened by using model numbers (not names), and calling dealerships “Saturn of [location]” ? No haggle, stress free, high-integrity selling at dealerships Key findings: Pricing & Placement Strategy ?Dealership strategy: Large territories (to prevent internal competition), e. g. one dealership per metro. ?Traditional import-car markets (East, West coast), not to cannibalize stronger GM heartland markets. Dealers chosen with import-brand expertise. ?Pricing: ?One price ? no rebates or promotions.

Facilitates option of calculating total package pricing and finance costs from the ease of one’s home on website. ?Affordable pricing with high value Key findings: Successes and Failures ?Initial success very high: ?170Kunits sold in ’92: 170% more than ’91, and representing 2. 1% share of domestic market. ?Cult-like following that drove sales growth until ’96. ?Failures: ?Employment model did not scale well to increased production. Increase attempts harmed quality and employee relations. ?Failure to reach 300Kunit/yr sales goal. Sales declined from peak in ’95 of 285Kunits.

?Electrical vehicle launch (in line with innovative image) was a flop ? Very late launch of SUV line in 2001 (SUV market was hot from ’96) ? L-series mid-size sedan line was a total flop, due to launch glitches, uninspired design, and failure to break out of compact-car image. ?Saturn perceived mainly as a “chick-car” ?Average buyer age is 43 despite belief that Saturn is for youngsters Key findings: SWOT ?Strengths: ?GM parent company (funding, expertise) ?Established brand, cult-following, buyer loyalty ?Culture of quality manufacturing?

Weaknesses: ?GM parent company (hesitation, strategy constraints) ?Tarnished image (ranked 31st among 38 car brands — down from 23rd in 2002*) ? Declining sales and heavy losses ($1B/yr*) ?Problematic demographics ?Foreign cars still lead in perceived quality ?Weak design Conclusions ?GM got caught up in Saturn “Kool-aid” ? failed to differentiate between marketing image, which created initial success in building brand and buyer following, and strategies that did not sustain advantages, like employment/manufacturing methods & focus on compact cars.

As a result, key adaptive measures were delayed. ?GM also seems to have implicitly viewed Saturn as a short-term strategy, creating GM buyers that would mature from Saturn into more luxurious brands. This didn’t materialize, but definitely tied Saturn’s hands. ?Innovation should only be taken so far ? too much of it doesn’t drive sales in majority markets. ?SWOT seems to indicate keeping the brand. Baby-boomer Saturn followers are a lucrative market worth maintaining. Recommendations: ?Keep brand basics (folksy marketing, made in USA, high-quality)?

Revive the brand with more luxurious, well designed models that appeal to the aging but rich Baby-Boomers, and don’t weigh down product strategy with other GM brands. Advantages: ? Increase appeal to males. ?Increase margins and profitability. ?Keep no-haggle, no-stress dealership policy that is Saturn’s hallmark. Today’s buyers have an information advantage with the Internet that doesn’t favor older sales models. ?Focus on domestic market ? Brand has no recognition or competitive advantage in foreign markets (yet). ?Modernize manufacturing strategies to support both higher volume but do not hinder quality (if the Japanese can do it? )