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John Fahy is the Professor of Marketing in the University of Limerick and Adjunct Professor of Marketing at the University of Adelaide. He is an award winning author and speaker on marketing issues around the world.

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Entries in value proposition (8)


Saab's Demise Almost Complete!

Some major Scandinavian companies like Nokia have been grabbing the headlines for all the wrong reasons lately, but one other Nordic competitor has been quietly slipping away into oblivion. Saab is quickly becoming a case study in everything that can go right and also can go wrong with strategy and marketing. Unrivalled success and prestige, followed by a series of bad decisions that have bankrupted the company. What went wrong and could it have been avoided?



The early days of this company are the good part of the story. Saab was formed after the Second World War out of an aerospace and defence company and produced its first car in 1949. It reached the pinnacle of its success in the late 1970s with the launch of the Saab 900 which went onto be its best-selling model with almost one million units produced. The appeal of Saab can be attributed to the performance of the car as well as to its distinctive design and specifications. In terms of features, Saab cars were unlike any other and it became a brand that consumers aspired to owning.


However, it was not just consumers that coveted the brand but also some other large corporations liked what they saw as well. When General Motors was looking to expand into the premium end of the market in Europe, they took a 50 percent stake in Saab in 1989 and completed full ownership in 2000. But their strategic management of the brand ultimately proved to be disastrous. In a bid to reduce costs, GM imposed design changes and began manufacturing models on shared platforms with other brands. The Saab 9-3 was built on the same basic structure as the Opel Vectra while the sporty 9-2x was so close to the Subaru that it became known as a Saabaru. While these and other decisions may have made sense financially, they certainly didn’t commercially. Saab lost its distinctiveness, its reputation for quality and its appeal. Customers voted with their feet and by the time GM put the company up for sale in 2010, its sales levels had collapsed to just 31,000 units.


Dutch niche car maker Spyker bought Saab in 2010 but failed in its efforts to rescue the brand which slid into bankruptcy in late 2011. Its major assets are now held by a Japanese-Chinese consortium, NEVS, that plans to being producing electric cars by 2014. A couple of smouldering embers in the ashes are worth noting. First there is an estimated 300,000 diehard Saab owners around the world – a customer base that has effectively been ignored for two decades. Second, Saab AB is holding onto the original and distinctive ‘gripen’ logo. Its associations are probably the only unique asset that has been left. And the moral of the story? A strategy that ignores the customer is going nowhere as fast as a turbo engine can go from nought to sixty!


Create Value, But Capture It Too!

In the world of manufacturing if you are to listen to all the media hype, you would be likely to come to the view that China is where all the action happens these days. To some extent that is true, but it is not the full story. This was brought home by an article published in Forbes (forbes.com) at the back end of last year, which gives a breakdown of who makes what from two of the world’s powerhouse brands, the iPhone and the iPad.




Both are made in China from locally sourced components but are Chinese companies and employees getting rich on the back of their global success? Not so it would seem. Chinese labour accounts for a mere 1.8 per cent of the final price of an iPhone while a further 22 per cent is accounted for by the cost of inputs and materials. But contrast these numbers with Apple's profits which reach 30 per cent for the iPad and soar to almost double that for the iPhone.


These numbers demonstrate the very important distinction between value creation and value capture. Through the use of good, reliable materials which are well put together, Apple's products are functionally strong and do the jobs that they are supposed to do. High levels of performance value are being created but the companies that are creating it are making relatively little money. Apple controls product design, software development, marketing and retailing and this is where the money is! The lesson in this is clear. Always examine the full supply chain and figure out where the value is being added and where the costs are being incurred. If you are operating in a high cost, low value part of the industry life is not going to be easy!

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