Jetta Life Cycle Challenge Essay Example

in both North American and European markets by 2005. Mexico's trade agreements during this time played a crucial role in making this achievement possible.

The Free Trade Agreements (FTAs) allowed entry into Latin America's emerging market as well as more developed markets like North America and Europe. It is important to note that these agreements were signed in a specific order, with priority initially given to the Americas and later expanding to Europe and Asia. Additionally, Mexico offered distinct advantages due to its cost-effectiveness. Despite having a factory in China with the lowest expenses, Volkswagen highly valued the strategic location of its Puebla plant near the North American and Latin American markets. The upcoming introduction of the Jetta A5 in 2005 presented significant opportunities for both Mexican and international markets.

The A5 model's higher cost compared to the A4 models can be attributed to the inclusion of technological advances. However, market research has shown that owners of A4 models are reluctant to purchase the car because they do not recognize these upgrades and are unwilling to pay a higher price. In order to maintain profits, it is necessary to attach a higher price tag to the A5 model. If Jetta offers both the A4 and A5 models and targets segment A with both, there is a risk of cannibalizing sales. Therefore, in this situation, the optimal approach is to continue producing the A4 model for segment A while also introducing production of the A5 model and targeting segment B.

Market research indicates that segment B sales have experienced a temporary decline, but are projected to increase in the future as a result of the launch

of a new brand in Mexico and the robust Mexican economy. The data further reveals that numerous current car owners who possess segment B or A4 models are likely to switch to the A5 model, with 23% transitioning from the A4 model specifically. It is expected that there might be some sales overlap between the A4 and A5 models due to their positions in the current stage of the product life cycle for the A4.

There is evidence suggesting that many non A4 car owners in Mexico view the prototype as being worth a price comparable to Segment B. Although the A4 model is in the maturity and decline stages of its product life cycle, it is still a profitable model. If the A5 model is targeted towards segment B, the A4 can still be successful in segment A. It is recommended that VW discontinues unprofitable variations of the A4 and competitively prices their vehicles to outperform rivals in the Mexican market. Additionally, reducing advertising efforts will help maintain loyal customers. Latin American markets, as indicated in Chapter 9 slides, are currently considered big emerging markets (BEMs).