Renault's Strategy

Topics: Cost, Automobile, Price Pages: 3 (812 words) Published: November 26, 2010
1.To what extent has the Renault “Espace” been a successful product? What contributed to its success – what was its competitive advantage? Renault was the first automobile firm to enter the minivan niche through its Renault “Espace” model in 1984. From shy starting, the sales of this vehicle went on to gain in importance far beyond expectations. The major points that contributed to the success of the line resided in the following: Original idea and cost structure. The original idea resides in the fact that Renault soon discovered the needs of European population in family-friendly monobody vehicles which could carry up to seven passengers. The period coincided with baby boomers (1943 – 1959) becoming parents. But, the main point of the competitive advantage of Renault was unquestionably the cost structure involving exclusive subcontractor Matra. Matra used SMC (Sheet Molding Compound) as an alternative to stamped steel used in the automobile industry. It resulted in low production costs. For example, in 1985 Matra sale price to Renault for the “Espace” was about 12,109 euros (sales amount of 170 M euros for 14,039 units). This transfer price allowed Renault to have a comfortable margin. In 1994, the transfer price to Renault was 13,980 euros and the Minivan was delivered to the final customer at an average retail price of 26,000 euros (tax and dealer margin included). Although, the advantage of Renault decreased once the Peugeot-FIAT alliance started. Only two years after their launching, Peugeot-FIAT minivans outpaced Renault “Espace” in annual registrations. From 64000 units sold in 1994, the “Espace” registrations fall to 35 000 units in two years. This 1996 year was the worst in sales and saw the break by Renault of their collaboration with Matra. In 2006, the “Espace” appears to be left behind on the minivans market. Ford, Peugeot-FIAT and imported vehicles like Chrysler Voyager are well seated ahead of Renault leaving the lozenge’s brand with a merely...
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