Introduction
In the early 1980s and 1990s, PAN was an official vehicle for government officials in Nigeria, and then, PAN vehicles were every man’s dream car. The most popular brands were 404, 405 and 505. Peugeot cars were known to be reliable, durable, and rugged. But after some years, the company has lost 95% of its market share to competitors like Toyota, Honda, and the rest. The purpose of this study is to find out why PAN failed in Nigeria.
Executive Summary
Peugeot Automobile Nigeria Limited was incorporated on December 15, 1972, as a private limited company under the Companies Act of 1968 with RC No. 10,961. It was established pursuant to a joint venture agreement made on August 11, 1972, between the Federal Government of Nigeria (FGN) and Automobiles Peugeot of Paris, France.
In this project, you will learn why Peugeot Automobile Nigeria Limited was established on a joint venture agreement.
Overview
The company had an agreement for the establishment of a passenger car assembly plant in Nigeria for the production and marketing of Peugeot brands of passenger cars of varying models and capacities at an affordable price for the Nigerian market. The joint venture agreement granted protection to the company through import restrictions and duty concessions.
The company, on its part, was to pursue a programme of gradual deletion of imported parts worth at least 30% of the ex-factory value of a completely knocked down (CKD) pack by the end of the third year of operations, and the agreement of an annual deletion target was agreed upon with a standing committee to be established.
Unlike other competing brands then, such as Volkswagen, Toyota, and Honda, Peugeot was in a joint venture with the Nigerian government, which is why it was the official car in Nigeria.
Today, Nigeria spends 100s of millions of Naira importing finished products (cars) from overseas, whereas the establishment of Peugeot in 1972 was to eliminate the problem of sending huge sums of money abroad for the importation of cars into Nigeria. The company, on its part, was to pursue a programme of gradual deletion of imported parts worth at least 30% of the ex-factory value of a completely knocked-down (CKD) pack by the end of the third year of operations, and the agreement of an annual deletion target was agreed upon with a standing committee to be established.
The company is located on a site of approximately 200,000 square meters at Kakuri Industrial Estate, Kaduna. Although the plant was commissioned in 1973, actual production commenced only in March 1975. At its inception, the company was designed to engage in the assembly of passenger cars of the Peugeot 203, 304, 404, and 504 models of cars, as well as another car with an engine capacity of about 800 cc yet to be introduced to the market as of when this report was written. The company started operations on March 14, 1975, and by 1981, it had an installed capacity of about 240 cars daily in two shifts.
Currently, the capacity utilization of the plant is very low, at about 10%. The challenges faced by the company are similar to those facing other industrial sectors and manufacturing concerns in the country. Used car imports remain the single most significant barrier to any expansion since they are priced at only about 35% of new PAN cars.
- THE PERFORMANCE OF THE ENTERPRISE
At the end of 2002, PAN had produced 521,676 vehicles. The bulk of the sales of Peugeot cars were for the public sector; probably about 60% of its sales were to government and government agencies. Most of the sales seem to have been achieved between the decades of the late 1970s and the 1980s. Out of the 521,676 vehicles sold by the end of 2002, the Peugeot 504 accounted for421,299, or9 approximately 82%.
Like most Nigerian companies, the downturn in the economy also affected PAN. The annual turnover from 1987 to date peaked in 1991 with the production of only 13,806 vehicles. The reduced level of purchasing power in the economy hampered sales considerably, making purchases from the government more important.
(Automobile Sector)
Main strategy
Peugeot Société Anonyme (PSA) launched new brand strategy for Peugeot and Citroen
PSA/Peugeot-Citroen aims to shift the positioning of its two brands further apart, although analysts are skeptical of the move.
Peugeot and Citroen cars chase a very similar customer base, which has been a problem for the French automaker for a long time. Presenting the automaker’s 2012 financial results, CEO Philippe Varin admitted, “Our brands are too close.”
In the future, Peugeot and Citroen will target two different customer groups, he said, while at the same time they will target what he called “profit pools
The Peugeot brand will move more upmarket and aim to appeal to customers who want a traditional type of car. The 208 subcompact’s high-performance GTi version and the new 2008 SUV-styled crossover are examples of how Peugeot can win higher profit margins per sale, Varin said.
Citroen will expand the brand’s upscale DS line to earn bigger profits, while mainstream Citroen models from the C1 to C5, the so-called C-line models, will be positioned slightly lower than the current cars. This means PSA has ditched its earlier, three-level strategy for Citroen to have DS, C, and Entry models by merging the latter two.
Varin said Citroen will not become a low-cost brand, while PSA Brands boss Frederic Saint-Geours said the new positioning for Citroen’s C-line models was decided back in 2009. Asked on the sidelines of the financial results press conference whether the new Citroens will be as profitable as the current cars, Saint-Geours said: “There is no reason they should be less profitable for PSA.”
He declined to say whether Citroen cars will compete against models from Ford or Opel at the higher end of the volume segments or lower down with Skoda and Hyundai. “Our brand positioning is new thinking, so we cannot refer to existing cars,” he said.
“We believe this strategy makes sense overall but carries substantial execution risk and could take many years to bear fruit,” Fitch Ratings said in a statement on Feb. 25. We are particularly concerned that customers won’t be able to easily understand and accept the existence of both entry-level/basic models and aspirational higher-end products within the two brands.
Bernstein Research said in a note to investors: “This may be the right thing to do for the long run, but we don’t need to quote John Maynard Keynes to know this may be academic if PSA runs out of liquidity and these products never get launched.”
(Automative News Europe)
The company’s sales strategy in Nigeria is to sell its products through distributors. The company has a network of distributors to sell its products across the country. The distributors are empowered to sell Peugeot products and perform after-sales services, as well as their repair and maintenance. There are 17 distributors in total, scattered all over Nigeria, covering different areas. These distributors have been upgraded from sales offices and workshops, and their staff are exposed to intensive training to achieve efficient after-sales technical knowledge of the products.
External analysis of Peugeot.
External analysis refers to the analysis of the external environment of a company. These are factors over which the organization has no influence, and they can affect the operation of the business. They are also referred to as PESTEL analyses.
The external environment of Peugeot includes the following factors: political factors, social factors, economic factors, technological factors, environmental factors, and legal factors.
All these factors may affect the external operation of the Peugeot Company. This refers to how the company will relate to the environment, the customers, and the government. For an organization to be successful, it should thoroughly understand the external environment in which it operates and come up with the strategies it will employ to ensure that it achieves its goals and objectives. Therefore, I will discuss the external analysis of the Peugeot Company in relation to the following factors:.
Political factors:
The truth is that a pest analysis of Peugeot vehicles in Nigeria demonstrates how the policies of the previous administration may have an impact on the company. Frequent changes in political structure affect an organization’s long-term strategic business goals. For example: In 2013, the Federal Government of Nigeria approved a New Automotive Industry Development Plan (NAIDP) to transform the Nigerian automotive industry and attract investment into the sector.
The auto sector is a key component of the Nigerian Industrial Revolution Plan (NIRP). The NIRP is a 5-year programme developed by the Federal Ministry of Industry, Trade, and Investments to diversify Nigeria’s economy and revenues through industry and to increase manufacturing’s contribution to GDP from 4% in 2014 to 6% by 2015, and finally above 10% by 2017.
The Nigerian market for automobiles is substantive and can readily sustain an automobile industry. In 2012, the country imported about $4 billion worth of automobiles, of which about two-thirds were used vehicles (United Nations Conference on Trade and Development).
The estimated annual vehicular demand for new vehicles is over half a million, made up of 100,000 new vehicles and up to 400,00 used vehicles (NAC) As of 2012, the population of the middle class was 38 million (Federal Ministry of Industry, Trade, and Investment) and growing, ensuring a sustained market for the automotive industry.
According to research work by the Lagos Business School, the market size for automobiles in Nigeria can easily reach the 1 million units mark annually if there is an affordable vehicle credit purchase scheme. Cost of asset financing at the moment is prohibitive so most Nigerians save up to buy cars on a cash and carry basis.
Economic Factors:
Economic factors was another majour external factors that could possibly affected the Peugeot Automobile Nigeria ltd. When you consider the trend in per-capita income of an average Nigeria, you can attest to the fact that 80% of Nigerian cannot comfortably purchase a brand new car and this external factor can only affect the profitability of Peugeot Automobile Nigeria.
For instance, In 2012, the Country imported about $4 billion worth of automobiles of which about two thirds were used vehicles (United Nations Conference on Trade and Development).
Social Factors:
These are the factors that affect our thought and behaviour in social situations. This includes feedback, splitting into smaller groups and unresolved conflict. Social factors affect is one of the factors that affected the organization. For instance, here is one of the honest feedback online; The problem stems from the fact that your normal Peugeot mechanic at the mechanic village is not in tune with the modern system in place in these be models. Personally though I think the 607 is a horrible looking car.
We used a 2007 Design 307 brand new for 12years before selling it. These their cars are amazing, lots of features that are practical and make sense, but getting a reliable mechanic is an issue. It’s not every time you’ll have money to go to AC Okocha motors, and most times when you venture roadside, they’ll bypass something for you, reducing the efficiency of your vehicle. (NAIRALAND)
Here the problem identified by this reviewer is maintenance problem which matters a lot for many Nigerian and has always been a FQ before purchasing any brand.
Technological Factors:
Peugeot had limited product line unlike her competition, for every segment that Peugeot was competing, Toyota had a car in several styles and model, and the simplicity in maintenance and second hand value made it the most desirable car for Nigerian. Therefor I will say that Peugeot Automobile Nigeria ltd did not not match Toyota in terms of technology therefore lost the market to Toyota.
Internal Analysis:
Internal analysis of a company a combination of internal factors the organization has power over, such as the four 7 of marketing, products, prices, place, promotion, people (employees), process and physical evidence, and resources.
Peugeot is a leading European car manufacturer. Peugeot is mainly into 5 segments which are cars, vans, scooters and cycles. All these constitute its product strategy. Further the Peugeot car segment is divided into electrical/hybrid segment, saloons, sedans, station wagons, multipurpose vehicles, SUVs, Combis. Peugeot also manufactures concept cars to be showcased in many motor shows. These cars gain the faith of the audience by showcasing its expertise in futuristic technologies and sustainable motor design and performance although within European market.
In the vans segment, it has 4 variants that are Bipper, Partner, New Expert and Boxer. In the scooters segment Peugeot has mopeds, scooter, maxi scooter and three wheeler scooters. The cycle segment also has a wide range starting from e-kicks/scooters, children bikes, city bikes, hybrid bikes and mountain bikes. Peugeot has even a cross variant as well as trekking bikes.
Peugeot apart from the above segment also gives services which ranges from rental services, financing, insurance, service packages, special services for its electric cars segment. It also provides professional services where the above services are bundled. Peugeot also provided connectivity services for redefining the car driving experience. The connected services ranges from emergency services, connected apps, breakdown assistance, and knowledge services about the vehicle to the user all these formed part of Peugeot internal factors.
Furthermore, the prices of the Peugeot vehicles depends on the customization a customer orders and the variants. Generally the petrol variants are cheaper than the diesel variants. Like for the Partner model in vans segment, basic prices range from £ 16,190 to £ 18,290 for the Active variant and £ 19,005 to £ 20,405. Further customers can install extra optional features which will change the prices further for Peugeot cars. In the saloon segment it has prices ranging from £ 24,340 to £ 32,190. The variants prices are quite closely placed which indicates customers get more options and may prefer the costlier variants because of the availability of more features in and around the same budget range. The Peugeot sports cars range start from £ 22,900 for 208 GTI model. This shows the sports segment is not premium priced. This gives an insight in the approach taken by Peugeot in its pricing strategy.
Peugeot sells its products through dealers which are present internationally. Peugeot sales outlets are around 10000 and its factories are spread out across France, Portugal, Spain, UK, Argentina, Brazil, and Slovakia. Peugeot has also outsourced its plants in collaboration with other automotive manufacturers. The plants are there in places such as Austria, China, Italy, Netherlands, Russia, Turkey, Malaysia, Japan, Nigeria etc. The presence of factories in so many countries helps widen its reach to the countries Peugeot is present in. It also sells its cars online with all the customization as could be done through the dealers. As this cars are customizable these are ordered, produced and delivered.
Peugeot focuses on promoting its brands through various channels. It uses TV, print. Online, billboards etc as a part of its promotional strategy in the marketing mix. Peugeot Design Lab launches various technologies and products which are futuristic and shows the company’s expertise in field of technology and innovation.
(MBA SKOOL)
Peugeot the resources and has presence in over 160 countries with 10000 outlets with manufacturing plants in different countries round the world such places like Austria, China, Italy, Netherlands, Russia, Turkey, Malaysia, Japan, Nigeria etc.
Another strong internal factors of Peugeot is its strong workforce, according to the chart represents by Statista.com, the total number of employees of the French group PSA Peugeot Citroën worldwide between 2013 and 2019. The number of employees has increased over this period, amounting to around 208,000 employees in 2019 compared to nearly 197,000 employees in 2013.
Strategic Capabilities of Peugeot Automobile:
Organizational capabilities are the abilities of an enterprise to operate its day-to-day business as well as to grow, adapt, and seek competitive advantage in the marketplace. In other words, capabilities are how the business does what it does – and does what it wants to do. An organization’s capabilities are multidimensional, made up of its people, processes and technologies, but also its insights, its mission, and integrated decision making. (Deloitte).
Although there is not enough information as to what Peugeot strategic capabilities are but one can draw inference from the existing data to make a better judgment about what Peugeot strategic capabilities are.
Peugeot Automobile is one of the leading brands in Europe however, they failed to have dominance in Nigerian automobile market share as a result of external and internal factors which was difficult to surmount.
However, in this new era of mobility, PSA portfolio of brands is uniquely positioned to offer distinctive and sustainable solutions to meet the evolving needs of customers, as they embrace electrification, connectivity, autonomous driving and shared ownership. Founded by visionaries who infused them with passion and competitive spirit, these brands have made automotive history for more than a century and continue to speak to customers and inspire our employees today.
Peugeot Automobile offers a full spectrum of choice from luxury, premium and mainstream passenger vehicles to pickup trucks, SUVs and light commercial vehicles, as well as dedicated mobility, financial, and parts and service brands.
Their driving force is the diverse and talented group of men and women around the world who bring their passion and experience to their work every day.
With industrial operations in over 30 countries and a commercial presence in more than 130 markets, Peugeot Auto will have the ability to consistently exceed the evolving needs and expectations of customers, while creating superior value for all their stakeholders. (stellantis.com).
The strength that Peugeot company has is a strong reputation in car manufacturer area. Peugeot company was founded in 1810 and as expand from apparel until its include even coffee mill , bicycles, motorcycles and car. Peugeot has received many international awards from the launch of the very first model of automobile to the latest concept car. It also known as a very reliable brand since its 1950s and 1960s models are still running in some part of Africa.
The next strength of Peugeot is its ability to introduce electric and hybrid vehicles. Peugeot has been known as a eco-friendly car brand as it ranked the second lowest for average carbon dioxide emissions among competitive brands in Europe.
Considering the weakness of PSA, according to their sales figure, more than 60% of their car sales in 2012 are from Europe. Their focus on developing hatchback vehicles are only popular in Europe. In order to break into international markets, they need to develop and innovate new products based on customers’ main interests.
The next weakness faced by Peugeot is overproduction of automobiles. From the strength stated above, we can see that Peugeot has production plant in many countries. This has caused the production of PSA vehicles in excess more than the market demand in most of markets.
Moreover, the third weakness of Peugeot is the inability to leverage its innovations in the luxury segment. Not like BMW, Mercedes, Toyota and Audi which have an established reputation for luxury cars and are offerings for a wide range of options to choose from. Not only that, some countries even having their own domestic cars which has become the first choice for the people to consume since domestic cars able to fulfill the requirement of people such as Korea, China and USA etc.
PSA has good opportunities to leverage on such as numerous manufacturing plants in many parts of the world. For the purpose of this study I will limit it within the Nigerian contest. Peugeot Automobile is sited in approximately 200,000 square metre at Kakuri Industrial Estate, Kaduna and has a good legal framework to operation in Nigeria is a good advantage that can be put to use by PSA to start production of cars in different model across market segment.
Peugeot left the American market in 1990, and after many attempts at coming back, thanks to the Fiat Chrysler Automobiles (FCA) and PSA Group merger, it’s finally happening. Larry Dominique, CEO of PSA North America, confirmed in a keynote at the Center for Automotive Research that Peugeot will return to the United States in 2023, with its own dealership network and online retailing. With their effort in producing electric cars they have brighter opportunities to compete effectively with other big brands such as Ford, Chevrolet, Buick, GMC and Cadillac.
Some of the treats PSA will be facing both within Nigeria and USA will be fierce competition. Peugeot has been known to be a good and reliable car but it will take them time, money and resource to be able to control automobile industry in Nigeria market like it was in 80s 90s.
Another treat PSA will face in Nigeria will be the indigenous automobile brand like Innoson Vehicles which has diversified his operations to include almost all segment of market from middle class, government official, utility vehicles, military etc
Profitability Of Peugeot Nigeria:
Although there is no much data on recent analysis of Peugeot Automobile Nigeria. But as at the end of 2002, PAN had produced 521,676 vehicles. The bulk of the sales of Peugeot cars was for the public sector, probably about 60% of its sales are to Government and Government agencies. Most of the sales seem to have been achieved between the decades of the late 70,s to the 80’s. Out of the sale of 521,676 vehicles by the end of the year 2002, the Peugeot 504 accounts for 421,299 approximately 82%.
Like most Nigerian companies, the down turn of the economy also affected PAN. The annual turnover between 1987 to date peaked in 1991 with the production of only 13,806 vehicles. The reduced level of purchasing power in the economy hampered sales considerably making the purchase from Government more important.
Lesson Learnt From The Strategies:
Product strategy
Production figures in the first 10 years between 1975 and 1985 varied between 36,000 and 66,000 cars per annum of models such as 404 saloon and station wagons, 504 – Delivery Van Ambulance and 505. Within the first 10 years 342,262 cars were rolled out of the Kaduna factory. During the 1975-1985 decade the 504 became very popular amongst Nigerians who perceived it as a dependable car and thus nicknamed it the Nigerian Car. As at the end of 2002, PAN had rolled out a total of 521,676 vehicles.
On the product strategy of Peugeot Automobile Nigeria they started with only three models in their product line 404, 405, and 504. This product strategy was not good enough to appeal to the diverse needs of different market segmentation.
Distribution strategy
The company’s sales strategy is to sell its products through distributors. The Company has a network of distributors to sell its products across the country. The distributors are empowered to sell Peugeot products, perform after sales services as well as their repair and maintenance. The distribution strategy was good, but they should have provided a guideline to all their distribution channels for an affordable repairs and maintenance. But the major cause of failure was not distribution strategy rather lack of early innovation and poor marketing strategy.
Peugeot Automobile Nigeria adopted a focus strategy.
Focus Strategy is the strategy which believes in concentrating on a small segment defined in terms of customer segment or geographical territory. A focus strategy means carefully choosing the arena to compete in and narrowing the competitive scope.
The strategy adopted by Peugeot Automobile Nigeria could not stand the test of time. Focus as a strategy was not a viable strategy for Peugeot Nigeria in order to compete effectively with competition.
Peugeot Automobile Nigeria fail to innovate earlier which affected their marketability in Nigeria. In early 80s/90s PAN was an official government vehicle and was dominating Nigerian automobile industry before the likes of Toyota, Honda, Hyundia and our own indigenous brand Innoson Vehicles took over the market.
Recommendation
As a business consultant I will recommend Peugeot Automobile Nigeria who has been known for manufacturing reliable and durable cars in early 80s/90s to adopt product innovations, price leadership strategy, increase their product line to meet different demands of market segmentation and lastly work on increasing the second hand value of their car just like Toyota has done.
Conclusion
The future of the passenger car business in Nigeria and for that matter for PAN is bright. This is because there is a well-established market for the different products of PAN. The customers of the company are numerous and all encompassing and cover the parties from the Private and especially the Public sector.
The company also plans to expand its range of products by importing completely built unit’s vehicles and testing the market for acceptance with the objective of manufacturing them in Nigeria. These include the 307, 206, 607 the Boxer, Partner and Expect buses.
