CIELO

A CAR IN TROUBLE

Introduction . Daewoo is good at making cars but bad at marketing them

Entry Of Daewoo
 Daewoo part of US $65 billion Daewoo Group founded in 1967 in Korea  In July 1995, Daewoo s first vehicle, the 1500cc Cielo was launched  Three variants were launched(Cielo, Cielo GLX, Cielo GLE)

It was launched in Indian markets in 1995  Introduced as a feature-rich, luxury family class  it came as a competition to maruti udyog ltd.  trusted formula of providing excellent services at low prices.


Mistakes .
 Lack of focused approach and inconsistent

policies.  It entered the markets with a high import content keeping the prices higher than the competitors.  Unable to rectify customer mistakes staff was unskilled.  Quality defects were ignored.

Mistakes contd
promotional campaign Diwali Bonanza Scheme was pushed inspite of Indian managers opposed it. This led to people began to look at car with suspicion. Offered incentives to dealers and financers which resulted in lower finance rates  Failure of Test drive scheme


Contd .
Drastic price reduction in Jan 98 Stopping the delivery of the car to the respective showrooms Creating new value benefits Substantial increase in advertising focusing on brand Daewoo

The Biggest Blunder

Hefty price reduction in jan 98  Stopped the delivery of cars to the showrooms  Created new value benefits  Substantial in advertising budget focussing on brand Daewoo


Facts & Figures

Initial booking : 114000 Cancelled : 70000
Period March 1996 EXPECTED SALES 20,000 (turnover of Rs 10 billion) 52000 ACTUAL SALES 9044 (turnover of Rs 6.05 billion) 13776

April- Dec 1996

1997 1998 : 9006 Cielo sold,accounting to 41% decline 1998-1999 : 5500 Cielo sold,accounting to 50% decline In the six months,loss of 351.4 million was recorded as sales declined from Rs.1.22 billion from 2.7 billion.

Graph
sales
50000 45000 40000

35000
30000

25000
sales 20000 15000 10000 5000

0
1995 Mar-96 april- dec 1996 1997 - 98 1998- 1999

Introduction Of Matiz
Initial success was achieved from Matiz  No way near to Global Success  Matiz had 70% market share in Korea


Analysts

Views

 Too ambitious and unrealistic  Failed to understand the indian market  Positioning efforts were termed Unmemorabl and Poor  Daewoo neglected Cielo after the launch of Matiz  Company would never be able to make success of Cielo

Was company itself responsible for its problems?

 Tremendous opportunity to capture the Indian market  Over ambitious and unrealistic targets  Unable to avoid the quality defects  Lack of focus in all their promotional activities.  Confusion over their product s positioning.

Was the korean parent company responsible for the debacle

 Too ambitious and unrealistic targets without

understanding indian market  Increased the scale of operations without much modifications to the plant.  Diwali Bonanza Scheme  Test drive scheme

Young Tae Cho s decision to change postion

 Not agree with it.  It was promoted as value product and sales

did increase for a brief period of time.  It fell after that because they started focusing more on Matiz.  The company needed to focus on the quality of the product and modified the car according to indian roads.