A French Multinational Vehicle Company: RENAULT
CHANNELS OF RENAULT:
By using direct channels, products and goods are sold directly to the customers and this reduce costs of other advertising and agency expenditures. Renault S.A. as a French multinational vehicle manufacturer company, uses mostly it’s direct channels more efficiently to reach customers and obviously they use this channel because of their cost reduction strategy. Renault’s efficient direct channel is company’s web page.
Considering Zero emission cars Renault tries to deliver company’s value proposition to customers by advertising and announcing campaigns from it’s direct channel. Customers get the opportunity to create their hybrid car by using direct channel and this give them a chance to differentiate products and suit their car to their personality. As a customer, you can choose technical specification, communication & navigation tools, in-car entertainment, instruments & controls, security equipment, heating & ventilation, seating & trim, driving safety and exterior equipment. These features are for individual buyers. But if the customer is business purchaser, it can reserve a Renault model with direct channel. The opportunity to reserve online Renault ZOE, provided you are a business purchaser with a fleet of less than 25 vehicles or a private retail purchaser.
Why does Renault choose to reinforce direct channels, especially web page?
1. Cost reduction strategy is the main reason about choosing web page as a powerful direct channel.
2. Auto industry is an oligopoly and in this case there are few firms and too much differentiation between brands. Renault gives it’s customer an opportunity to differentiate hybrid cars by using it’s web page. This is the cheapest and easy way to compete with other auto companies.
As Michael Porter, Harvard Business School Proffesor stated in it’s Five Forces of Competitive Positioning Model, buyers power will be higher if, they can easily switch to other providers so the provider needs to create a high quality service at a good price. Considering this model, Renault survive with competition and attract it’s customer segment with company’s direct channel.
Porter’s five forces model of competition specify determinants of buyers power like followings;
1. Product differentiation
2. Buyers’ ability to use multiple sources
As a secondary item, customers reach Renault hybrid cars by indirect channels, such as partnerships.
In 2008 Renault-Nissan signed a deal about mass-production of electric cars for an initiative in Israel with Better Place, a US company developing new non-petroleum based transport infrastructure. Renault aimed a mass market about 10,000 to 20,000 cars a year in Israel. Renault would also develop exchangeable batteries for the project.
Renault also collaborated with Better Place to produce a network of all-electric vehicles and thousands of charging stations in Denmark. The Renault Fluence Z.E., was selected for the Israel project, being the first zero-emission vehicle with a switchable battery, with trials in 2010 undertaken with the Renault Laguna.
The Renault-Nissan Alliance has signed more than 100 partnerships aimed at preparing markets and infrastructures for the mass production of electric vehicles. Renault-Nissan Alliance has worked closely on a number of projects aimed at evaluating full-scale mobility systems. To show regard to hybrid car industry, Renault can attract customers by creating easy access to battery charging facilities. Using their indirect channels, partnerships, customers can easily charge their electric cars’ batteries in two ways: The Single Wall-Box (home charging solution), charging solutions at your workplace, or in public areas like supermarket car parks and by using British Gas(for United Kingdom). British Gas can provide the fastest, safest and most convenient charging options for electric vehicles (considering United Kingdom). With respect to power of brand and partnership aggreements, Renault is the leader comparing with charging battery services. Renault tries to make aggreements with powerful energy providers to give the efficient and fast battery charging service for it’s customers. They have pilot projects aimed at evaluating full-scale mobility systems and other examples are included as followings:
• The SAVE Project (Seine Aval Véhicules Electrique) in association with EDF, Scneider Electric and other partners in France’s Yvelines department.
• A scheme with German energy provider RWE (North Rhine- Westphalie).
• Another scheme with Italian energy provider A2A (Lombardy).
• The VERT Project on the French-administrated Reunion Island (Indian Ocean) which sets out to look at the special case of island communities.
• The Brisith energy providing company called British Gas. A number of companies are starting to build the infrastructure of charging points around the UK and the government has made £30M available through “Plugged-In Places”
Companies which are stated above represent the success of Renault’s indirect channels, in other words partnership aggreements.
Delivering Value Proposition Attaching Direct Channels with Campaigns! Renault gives it’s cutomers a chance for having four year:
1. Warranty: Your vehicle is covered by a warranty package for you to 48 months.
2. Servicing: Free servicing during your first four years of ownership, or your first 48,000 miles, whichever comes first.
3. Roadside: 24/7 roadside assistance in partnership with the AA.
4. Finance Available: If you want to purchase your car with finance, four year finance deals are available.
This four steps include technical and financial purposes. Creating campaigns and introducing them by using customers
social media accounts & Renault’s web pages are ways of Renault’s promoting these purposes to customer. For instance Renault promoting 4+ package service to it’s customers by a slogan which is called “A lot can happen in four years!” and you can use a Facebook application to see what had change so in your life during last 4 years. This application do not give a technical information for customers but they can be aware of Renault’s value proposition by using it.
COST STRUCTURE :
Expenses that a firm must take into account when manufacturing a product or providing a service is called cost structure. Types of cost structures include transaction costs, sunk costs, marginal costs and fixed costs. The cost structure of the firm is the ratio of fixed costs and variable costs. Following table represents cost structure of producing a hybrid car. The cost structure of the industry, where fixed costs are a high precentage of costs, the profits will be very dependable on volume. In oligopolistic competition, one of Renault’s fixed cost is $99,528,504.2 (€74,64637815). Comparing with other hybrid car producers Renault reduce it costs by merging with Mécanique Aviation Traction or Matra. Matra (Mécanique Aviation TRAction) is a French company who covers a wide range of activities mainly related to automobile. Matra decrease it’s production costs by using qualify steel and after Renault and Matra merged, Renault decrease it’s production costs by using the steel the way Matra used. This situation acceptable also for hybrid car production period. This kind of cheap materials decrease Renault’s costs. Matra used SMC (Sheet Molding Compound) as an alternative to stamped steel used in the automobile industry. It resulted in low production costs. For example, in 1985 Matra sale price to Renault for the “Espace” was about 12,109 euros (sales amount of 170 M euros for 14,039 units). This transfer price allowed Renault to have a comfortable margin. In 1994, the transfer price to Renault was 13,980 euros and the Minivan was delivered to the final customer at an average retail price of 26,000 euros (tax and dealer margin included).
Although, the advantage of Renault decreased once the Peugeot-FIAT alliance started. Only two years after their launching, Peugeot-FIAT minivans outpaced Renault “Espace” in annual registrations. From 64000 units sold in 1994, the “Espace” registrations fall to 35 000 units in two years. This 1996 year was the worst in sales and saw the break by Renault of their collaboration with Matra.
Sale Price Per Car (MSRP) $22,195.00
Profit Margin Per Capita 6.64%
VC%75.0 Variable Cost Per Car $15,541.55
FC%25.0 Fixed Cost Per Car $5,180.52
Priuses Sold 19,156
Total Fixed Costs $99,528,504.2
Sales Price Per Car (MSRP) $22,195.00
Profit Margin Per Car 0.00%
Total Cost Per Car $22,195.00
Variable Costs Per Car $15,541.55
Fixed Costs Per Car $6,653.45
Total Fixed Costs/Fixed Costs Per Car=14,950
Nissan and Renault share a common purchasing agency for volume synergy. The Japanese carmaker aims to reach more than 50 percent of common components with Renault, compared with the current 7 percent, Yasuhiro Yamauchi, Nissan’s senior vice president in charge of purchasing, said at a briefing in Yokohama. The executive didn’t give a timeframe to reach the target.
Nissan is expanding localized production overseas and shifting domestic output to Kyushu in southern Japan to take advantage of lower local labor cost and proximity to South Korean suppliers, Yamauchi said. This comes as the company targets lowering total costs by 5 percent each year through March 2017
Renault SA (RNO) and Nissan Motor Co. (7201) said they aim to double annual cost savings from their alliance within four years, while denying a Reuters report that they’re reviewing their cross-shareholdings.
The Success of ZOE Z.E. Model:
Before the Renault Zoe rolls into European showrooms next spring with a promise of affordable electric mobility, the super-mini car cruised to a fuel-economy victory in the English countryside.
The Zoe emerged as top mass-production vehicle Saturday in the Royal Automobile Club’s (RAC) Future Car Challenge, achieving the equivalent of 163.3 miles per gallon (69.4 kilometers per liter) in the Brighton-to-London road rally.
It is fitting that the race ended at Regent Street, one of London’s premier shopping thoroughfares, crammed with big-name brands that daily beckon hundreds of thousands of shoppers. French automaker Renault, which has a13-year-old alliance with Japan’s Nissan, aims to entice consumers to the world of electric vehicles with the Zoe. (Related: “Eleven Electric Vehicles Charge Ahead, Amid Obstacles”) The super-mini’s base price will be roughly half that of Nissan’s critically acclaimed but slow-selling Leaf. Although buyers will have to pay separately for the battery, the Zoe’s overall cost will be less than that of most other EVs. Renault hopes that will be a breakthrough for the nascent electric drive business. Renault and Nissan have pledged a $5 billion investment in battery-electric vehicle development, and they have made a commitment to produce cars for people “who want to liberate themselves from fossil fuels.” (Related: “Pictures: A Rare Look Inside Carmakers’ Drive for 55 MPG”)
A revenue stream is a method that a company, organization, or individual uses to collect money—often automated—from users of their product or service. In essence, it is a method of earning money and a way to protect it. Renault earned high amount of money from Europe before 2011, before Eurozone crisis. Renault exporting cars to Germany, Italy, Spain, United Kingdom, Belgium, Poland, Mexico, Colombia, Argentina, China, India, Iran, South Korea etc. But especially because of the Eurozone crisis Renault lost power in Europe and as you can see from the chart above, in 2011 Renault got most of money from Europe but during the first quarter of 2012 calendar year, with respect the crisis, it’s earning decline fastly. Renault’s revenue stream slow down starting from 2011 first quarter.
Region H1 2012 H1 2011 Year 2011
Europe 12,876 14,283 27,408
Americas 2,985 2,292 5,21
Asia-Pacific and China 1,859 1,825 4,575
Euromed*-Africa 2,118 1,921 3,755
Eurasia 1,097 0,78 1,68
Total Revenues 20,935 21,101 42,628
France 5,809 6,406 12,119
* The Euro-Mediterranean Partnership (or Barcelona Process) started in 1995 with the Barcelona Euro-Mediterranean Conference. The European Union stated the intention of this “partnership” is “to strengthen its relations with the countries in the Mashriq and Maghreb regions”. The partnership laid the foundations for what came to be the Union for the Mediterranean, an institution building on, but not replacing, the EuroMed Partnership.
Remember that hybrid sales, gas prices and oil prices are correlated.
Gas vs. Oil 0.8984
Oil vs. Hybrid Sales 0.8371
Gas vs. Hybrid Sales 0.8624
Because of increasing oil prices, consumers try to avoid purchasing oil based products. In this case, companies who produce hybrid cars, will increase their revenue streams because of consumers low demand for oil based automobiles. Because of the positive correlation between oil prices and hybrid sales, Renault will increase revenue streams by selling hybrid cars. High correlation allows car companies to estimate number of hybrid cars to be sold based on gas prices. The table below and correlation value that stated before, during 2004, increasing oil prices give chance to hybrid car producers increase their revenue.
Renault’s sales volume dropped 18% in Europe in a market that shrank 9.3%, reflecting the company’s large exposure to falling demand in southern Europe. But Renault said 55% of sales were outside Europe, where revenue per vehicle sold is now close to its European levels.
Renault hasn’t been able to escape the price war in Europe as car makers struggle to preserve market share and keep chronically underused assembly lines moving by slashing sticker prices in the companies’ showrooms.
Sales of the Clio, a subcompact hatchback that is one of the mainstays of the company’s product catalog, have sagged pending the arrival of a new generation model in Renault showrooms this month. The company has no significant premium-car sales unlike Volkswagen AG, VOW.XE +1.66% the German auto maker that has so far weathered the storm in Europe well.
But Renault is clearly better-placed than some of its mass-market rivals due to its wide range of popular low-price and high-margin vehicles that is proving to be a solid antidote for households seeking to preserve their spending power without sacrificing the freedom that comes with owning a car. Renault sold 14,000 more entry level vehicles from its Dacia unit world-wide in the third quarter from a year ago compared with a 51,000 decline for the rest of the group.
Renault can also fall back on its decade-old alliance with Japan’s Nissan. The companies aim to nearly double annual efficiency savings stemming from their long-running alliance to €4 billion in 2016 from this year’s expected level.