Market penetration strategies of a new entrant in the auto loans industry

• Main Author: Llamas, Raymond M.
• Format: text
• Language: English
• Published: Animo Repository 2001
• Subjects: Consumer credit > Philippines; Mortgage loans > Philippines; Ford Credit
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3989
• Institution: De La Salle University

At present, based on interviews with personalities who are experts in the industry, the entire auto loan portfolio is estimated at Php 25 billion. More than 20 different dynamic players characterized by intense cut-throat competition for customers, are active in the industry. Given the extremely fierce competition surrounding the automobile financing industry as well as the incessant growth of the middle class market with abundant purchasing powers, capturing and maintaining significant shares of the market is improving to be eminently difficult. Ford Credit brings to the Philippines its expertise in the consumer and commercial financial services by offering a broad array of products specific to auto loans financing. Formed in 1999 via the acquisition of Standard Chartered Bank's Customer Finance Division, Ford Credit was established mainly to support the operations of its mother company-- Ford Motor Company, which is into car manufacturing and sales. With this, Ford Credit will be the foremost recipient of car financing business from Ford auto dealerships. The right of first refusal agreement will cast a stronger business relationship amongst the Ford Group, translating to complementary sales growths for both entities. Ford Credit aims to be the leading provider in the local market of consumer financing product and services. Its vision is to constantly achieve industry-leading growth and profitability while maintaining its mission to support, maximize and enhance the value of Ford Motor Company. The immediate objectives of Ford Credit is to increase profits by thirty-three percent and inversely reducing total operating cost by thirty percent. Long-term objectives are concentrated on industry-leading customer focus, increased capital, and operating efficiency and increased focus on product and market diversity. Key points in the main business plan is to operate new markets vie set-up of regional business units in high economic growth areas in Metro Manila. Thrust market reorientation of Ford Credit's auto loan products and services through effective advertising. Brand awareness and recognition is essential in building its name and credibility in the business. Due to the saturation of the Metro Manila market, it is essential to expand business and branch coverage to other key cities in addition to its niche marketing strategy predominantly with Ford affiliate dealerships. This would present tremendous growth opportunities and be the industry-first to tap such a market. This strategy will take a different direction from the usual business practices, as most financing companies fight it out in the limited customer market of Metro Manila via its existing base. Establishing the initial business relationship with the provincial auto dealers will be main groundwork towards strong and profitable business synergies between Ford Credit and auto retailers. Moreover, Ford Credit's presence in the dealers will cascade to the buying public as the brand name will be given priority in the selection of new business. Regional business units with close tie-ups with an outsource branch network will guarantee faster processing and approval turnaround times. Plus, convenience from both front-end and back-end support systems in terms of customer servicing. The bulk of the customers are individuals owning a single or combines (married individuals) of at least P360,000 annual income and a debt-to-income ratio of 30% and below. The remaining clients come from the business sector, as employee car benefit or for company use. Market share is projected to increase steadily vis-a-vis the growth of the Ford Motor Company's sales. Competition will continue to be fierce, characterized by interest rate wars and speedy loan approval with or without background checking. Consumer will continue to dominate the bargaining battle and financing companies have to adapt through increased services in addition to the above mentioned. Ford Credit's manpower is comprised of 32 staff and personnel that are highly skilled in the field of auto loans due to previous work experience from competitor companies. This expertise coupled with Ford Credit's management style and aggressive marketing strategies will certainly produce enormous growth and success potential. With an initial capital outlay of P1 billion for the purchase of SCB's operations and existing portfolio, Ford Credit adopts a high yield-low volume business approach with return of investment expected recovery after its 11th year.