Analysis of Declining Demand for Smart Cars in the United States

Analysis of declining demand for Smart Cars in the United States

2008 -2011

Research proposal for Business research methodology class.

(BA 306, group project)

Presented to

Professor Sergey Aityan

By

Jeihun Mamedov

Carla Alvez

Burcu Karabulut

Nese Erturk

Aslihan Cancoban

Introduction

Daimler AG Company with headquarters in Biel, Switzerland, observed an underlining conditions and spotted the evidence that recent trends in constantly increasing gas prices and limited parking spaces created significant demand for fuel efficient compact cars. Smart City-Coupe was designed with fuel efficiency and ease of parking in mind and introduced to European market in 1993. Engineered by Daimler and designed by Swiss watchmaker swatch. This funky looking car that fits two passengers quickly grew in popularity. The smart city-Coupe was welcomed by consumers who enjoyed the comfort of its compact ability in small streets of Europe, as well as excellent fuel economy. In 1998 Smart City-coupe instantly became one of the most popular car models in nine European countries which led to Companies decision to expand line of models offered to consumer. New models however didn't not meet the positive expectations and were even considered to be put out of production. In 2006, Daimler renamed Smart City-Coupe and new funky car on the street was named For two. New model also was modified in size, transmission and safety features which all helped to boost sales in 36 countries. Total modification of the car in 2006 was followed by another big step in company's history, introduction of Smart Car in the United States of America. Underlining conditions were similar to Europe's where car gained rapid popularity. Future of Smart Cars in the United Sates seemed bright and the progress looked very promising. Fuel efficient compact Smart Car had high demand expectation from consumers in the United States, however the following year revealed reality which was not something that Smart Car retailers expected to face. Sudden decline of Smart Car sales in the United States disappointed investors and forced Pensee group to drop its exclusive distributor rights for Smart car retail in America. In 2010 sales declined 60.9% from previous year, and this sets up a problem which is to be found a solution for in a given research. The research will focus on finding reasons behind drastic sales decline of smart Cars in the United States, from the year it was introduced to the american market till 2011.

The purpose of the research.

The purpose of this research is to identify causes of declining demand for Smart Cars in the United States over last 3 year and suggest an appropriate solution for the problem to AG Daimler, in order to increase popularity of the car.

1. Analyzing the product itself to find out what causes a decline in consumer demand for Smart Car model.

When Smart car was introduced to the United States of America, its size modification,additional safety features and redesigned transmission from previous model were thought to boost popularity and demand for the car, however the outcome was completely different. This raises several questions, one of which asks if the design and features of the car are the reasons behind the poor demand.

2. Determining if external factors are the cause of declining demand.

Tremendous popularity of Smart Car in Europe and 36 countries before United States was driven by cars good fuel efficiency which played a big role during the times of constant increase of gas prices. Constant limitation of parking was another driver for Smart Car consumers. This features are becoming more demanded in the United States since oil prices and parking limitation are constantly increasing as well. Even though underlying factors are favorable for increasing demand of a Smart Car, some other external factors might be influencing the demand, and the goal of the research is to find them.

3. Processing data and Finding solution to the problem, suggesting an appropriate modification that would help increase the demand for Smart Cars

* Will modification of the Smart Car model help increase the demand for the car?

* Are additional models and verity