Addressing Eco-Friendliness as a Marketing Strategy an Investigation in the Car Industry

8/6/2019 Addressing Eco-Friendliness as a Marketing Strategy an Investigation in the Car Industry

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Department of Business Administration

Title:

Addressing Eco-friendliness as a Marketing Strategy: Aninvestigation in the car industry

Author:

Emilene Reis Leite

15 credits

Thesis

Study programme in

Master of Business Administration in

Marketing Management

Master of Business Administration in Marketing Management


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Title Addressing Eco-friendliness as a Marketing Strategy: Aninvestigation in the car industry

Level Final Thesis for Master of Business Administration in MarketingManagement

Address University of Gvle

Department of Business Administration

801 76 Gvle

Sweden

Telephone (+46) 26 64 85 00

Telefax (+46) 26 64 85 89

Web site http://www.hig.seAuthor Emilene Reis LeiteDate 2010-04-29Supervisor Aihie OsarenkhoeAbstract

Keywords Green Marketing, Innovation, Value creation, Market orientation


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MBA thesis in Marketing ManagementEmilene Reis Leite

Handed in: April, 2010

Peoples

Nature

Vehicles

Addressing Eco-friendliness as a Marketing Strategy:

An investigation in the car industry

Zero CO2emission


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Table of Contents

1Introduction......................................................................................................................1

1.1 Motivation and Research Question............................................................................32 - Theoretical Framework................................................................................................3

2.1 Green Marketing: Strategic opportunity to innovation..............................................3

2.2 Previous Research in Green Marketing......................................................................5

2.3How firms create value? .............................................................................................6

2.4 Marketing Orientation................................................................................................9

2.5 Market Orientation and Environmental Practices....................................................12

3- General Automotive Industry.....................................................................................15

3.1 Automotive Industry Attractiveness............................................................................19

4Methodology...............................................................................................................21

4.1 Research Strategy.....................................................................................................22

4.2 Research Approach..................................................................................................24

4.3 Research Process......................................................................................................25

5Descriptive Results ....................................................................................................26

5.1 Interviews.................................................................................................................26

5.2 Firms reports...........................................................................................................29

5.3 Linking Anderson and Narus model with firms behaviour....................................30

6- Analysis and discussions ............................................................................................32

7Limitations..................................................................................................................38

8- Conclusion....................................................................................................................39

9- Future Research.......................................................................................................... 39

APPENDIXASurvey Question........................................................................................................40

BAutomobile Technological Evolution Timeline......................................................44

C- Tables summarizing the empirical results................................................................45

D- Figures showing firms green trends......................................................................... 50

REFERENCES


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Abstract

Research Questions: Environmental consideration has influenced managerial decisions

and has required from firms to develop an organizational culture that focus on theenvironmental issues. Despite the importance of adopting a business philosophy that take

into account the ecological concerns few studies have examined the relationship between

market orientation and environmental practices. This thesis contributes to fill this gap by

addressing the following questions: 1) Does the introduction of the environmental

facilities help firms towards green innovation? 2) Is Green marketing strategy of firms

positively associated with the augment in performance? 3) Does green marketing

communication affect positively corporate image?

Research Objectives: My aim is to investigate if firms green strategy can encourage

innovation; enhance corporate reputation and increase overall performance.

Research approach and methodology: The assesment of companies green initiatives

and the effects on their performance have been achieved through the content of annual

and sustainability reports as well as interviews with business managers.

Findings: The investigation indicates that when implementing an effective green strategy

firms will improve their managerial and organizational performance and such

improvements can contribute positively to their financial outcome. The better use of theresources via the introduction of the environmental facilities by firms indeed can help

them towards green innovation. Add to that, communicating environmental practices also

seems to be an important tool to enhance brand reputation. Thus this study agrees with

some authors who affirm that integrating environmental issues into business activities

firms can increase efficiency and competitiveness while reducing environmental impact.

Concluding remarks: The core lesson learned from this scientic work is that the

response of the firms in prioritizing the implementation of eco-friendly practices is linked

with their perception of current environmental trends. The most firms reinvent

themselves by adopting more reuse, recycle, reduce, re-design, green training, green

marketing, etc more eco-oriented they seems to be.

Keywords: Green marketing, innovation, value creation, market orientation.


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1. INTRODUCTION

A greater consciousness of environmental issues, working conditions and social

responsibility has led to an augment in the number of consumers considering all these

aspects when shopping. Companies aim to express their concerns and awareness of the

importance of such issues in their marketing activities. The relationship between the firm

and the environment has been an important theme in both professional and academic field

(Starik & Marcus, 2000).

The fast deterioration of the earths ecosystems not only has attracted the attention of

the scientific community but also has questioned the sustainability of the current

economic system (Jimnez & Lorente, 2001). Thus, the concept of sustainable

development has been commonly adopted by firms as one way to rethink their corporate

social and environmental responsibilities (Stanwick & Stanwick, 1998; Nash, 2000).However, to reduce the environmental impact has been a big challenge to many firms in

different industries. In Sweden, for instance, the personal mobility has seen the most

dramatic change in the last two decades with the increasing number of households that

have access to a private car (Sika Statistics). Transportation not only requires a high

consumption of non-renewable energy resources but also the emissions from vehicles

contribute to both local and global environmental problems. For many consumers, a

change from car to more environmentally friendly forms of transport implies a conflict

between individual short-term interests and social or collective long-term interests

(Kurani & Turrentine, 2002). For firms, a new perspective on consumer acceptance and

perception to green products as well as green initiatives represent a great room of

opportunities since green marketing can be a profitable endeavor (Grant, 2008). BMW

for instance in 2007 started a project whose aim was to incentive workers to reduce

energy consumption at their workplaces. The various energy-saving measures resulted in

saving of approximately 62 millions of Euros (BMWs Annual report 2008).

Undoubtedly, legislation has effectively caused transformation in the way business has

been made and many progresses have been achieved in the past decades. Policies to

reduce carbon emission mainly in the automotive industry with tax rebate for buyers

choosing alternative fuel vehicles, lower pollution via carbon credit program, more strict

laws concern to the usage of hazardous substances, etc are among other examples of how


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regulation has been a drive force of changing. However, it is just one of many forces that

will drive the necessary change into the future which demands even more noticeable and

effective actions from community, government, enterprises, NGOs altogether to protect

the environment (Olson, 2008).

From the supply side, firms must have a green strategy that helps them to make

decision that can cause a positive impact on the environment. Increased efficiency in the

use of resources, return on investment, increased sales, development of new markets,

improved corporate image, product differentiation, and enhanced competitive advantage

are examples of several benefits that firms can get when integrating environmental

sustainability issues into business activities (Bhat, 1993; Fierman, 1991; Peattie, 1992;

Miles & Munilla, 1993; Shrivastava et al., 1998; Berry & Rondinelli, 1998; Henriques &

Sadorsky, 1999; Kolk, 2003) but to obtain such benefits, appropriate strategies arenecessary. Green process, new product development and effective green marketing

communication play an important role to succeed (Albino et al., 2009). To respond

effectively and efficiently to the environmental sustainability challenge, it is imperative

that firms recognize that green marketing must be a fully integrated part of a firm's

strategic marketing plan. In this scientific work my aim is to investigate how firms have

used the eco-friendliness approach, more specifically in the automobile industry, as a

marketing strategy. My analysis suggests that the implementation of eco-friendly

practices is linked with firms perception of current environmental trends.

This thesis adds to the research body by relying on the understanding of how effective

green strategies can improve efficiency, encourage innovation and competitiveness. Its

structure is organized as follows. In the next section, a selection of previous research

studies in green marketing is presented. Section 3 shortly introduces an overall trend of

the automotive industry and green consumer behavior in Sweden. The design of the

research is depicted in Section 4. Subsequently, Section 5 starts with a discussion of the

data analysis and findings and finally interprets the questionnaire results. This section

terminates by considering if addressing eco-friendliness translated in firms market

penetration and profits. Limitations in terms of both, data set and methodology are

highlighted in Section 7. Finally, the conclusions are presented in the section 8 and future

research in the section 9.


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1.2 MotivationResearch Question

Environmental consideration has influenced managerial decisions and has required from

firms to develop an organizational culture that focus on the environmental issues. Despite

the importance of adopting a business philosophy that take into account the ecologicalconcerns few studies have examined the relationship between market orientation and

environmental practices. The motivation of the current thesis is to investigate firms

strategy in addressing their commitment to the environment conservation and at the same

time encouraging innovation, enhancing corporate reputation and increasing overall

performance. Thus, my aim is to answer the follow questions:

1. Does the introduction of the environmental facilities help firms towardsgreen innovation?

2. Is Green marketing strategy of firms positively associated with theaugment in performance?

3. Does green marketing communication affect positively corporate image?2. THEORETICAL FRAMEWORK

After presenting an overview about the link between green marketing and innovation as

well as the selection of previous research studies, the following subsections intends to

first give an insight into the strategy of value creation and market orientation. Based on

the idea that a market-oriented enterprise is systematically and entirely committed to the

continuous creation of superior customer value, understanding the correlation between

these two approaches is worthwhile. Besides that, both can shed light on firms

motivation in adopting environmental practices. This short illustration aims to introduce

the reader into the topic and making the research questions presented above easier to

understand.

2.1 Green marketing: a strategic opportunity for innovation

Green marketing is driven by the green consumption whose aim is not only to protect the

environment but also to use firms resources efficiently and effectively. Efficiency is

synonymous of increasing performance, boosting profits via cost reduction, adding

customer value and increasing market share. Porter & Van der Linde (1995) explain this

when they regard pollution as a form of economic waste. That it, harmful substances, for


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instance when discharged by companies into the environment in somehow it is a sign that

resource were used inefficiently or incompletely. If from one side, reduce pollution seems

to be an extra effort that firms must address and whose solution may rely on additional

investment in research and development. Both require time and money allocation. On the

other side, when firms are able to increase the quality of their production process via

reducing or eliminating waste, productivity tend to increase and cost run in opposite

direction.

By claiming that green design is the start point of successful green marketing, Bhat

(1993) introduces source reduction and better waste management as two kinds of green

design strategies. Source reduction embraces the concept of pollution prevention via

material substitution and product life extension while waste management refers to design

for recyclability, remanufacturing and composting. The first can help firms to reducewaste generation and keep competitiveness since a non-polluting product tends to be

preferred for costumers than a polluted one. In the long run, firms that do not invest in

environmental friendly technology tend to loose market. The second aim is to design

products, which waste cannot be totally eliminated but can more easily be reused. Thus,

bearing these two strategies in mind, enterprise may use it as a guide to help them

choosing the best green designs.

There are three main forces that determine the extension and the rate of consumer

adoption to the green technology which are: consumer taste and preferences for

environmental friendly products, supply-side decisions towards to green requirements and

government policies and regulations (Polonsky & Rosenberrger, 2001; Bhat, 1993) that

impact directly on consumer behavior and companies orientation. The latter objective is

simultaneously to meet customer needs and to exceed regulatory compliance (Hindle et

al., 1993)

People have recognized that the industrialization has damaged the environment and

also influenced negatively their living standard. This awareness has made them to value

highly the real nature, to be interested on non-polluted green food and also to be linked

with the natural environment through green forest and fresh air (Kilbourne, 1998;

Hanningan, 2006). For firms, a new perspective on consumer acceptance and perception

to green products represent a great room of opportunities since green marketing is not


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purely altruistic, it can generate profits (Grant, 2008). The firms challenge is to satisfy

the consumers' "green" demand through proper design, production, sales and recycling of

products. Add to that, strict environmental regulation to lower emission in the car

industry, for instance, can be a challenge for many firms but also an opportunity to

improve competitiveness by encouraging efficiency and innovation (Thun & Muller,

2009). Addressing environmental friendliness products, firms can differentiate

themselves from competitors and to assure firms competitive advantage (Reinhardt,

1998), to enhance firms corporate brand image, to show transparency and ethical values

that can capture buyers perceived credibility (Anderson & Narus, 1998), to develop

green innovative and commercially viable products that meet environmental benefits and

also to match customer interests. In brief green marketing seems to be a source of

reputation, competitiveness and financial advantage (Mintel, 1991; Worcester, 1993).

2.2 Previous Research in Green Marketing

Researches in marketing including environmental perspectives started in 1970 whose

work was centered in the relationship between environment awareness and consumer

behavior, more precisely in recycling activities (Kassarjian, 1971; Zikmund & Stanton,

1971, among others). Despite such attention to the environmental concerns, was only in

the late 1980 and earlier 1990 that green marketing concept emerged. Since then

researchers has embarked upon on different waves supported by a growing consumerinterest in green products and a pronounced willingness to pay for green features (Mintel,

1991; Worcester, 1993).

Contradictorily, claims that consumers were willing to pay more for green products

was not clear since the green demand in 90s had increased only very little and this was

evidenced in Mintles reports published in 1995 (Mintle,1995). In this perspective, some

researchers have agreed and suggested that the opinions of consumers do not appear to

translate into changes in purchasing behavior (Carrigan & Attala, 2001). That is, there

appears to be a gap between what consumers says about the importance of green products

or ethical issues and what they do at the checkout counters. Table 1 shows evidence about

such paradox, i.e.; gap between consumer environmental attitudes and purchasing

behavior. Furthermore, surveys show that buyers are not necessarily willing to pay

considerably more for green products. The preference for green innovation depends on


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the price of them, i.e. they would prefer them only if their prices were equal to those of

normal ones (Thun & Mller; 2009). Add to that, studies reveal that green products

which delivery for the consumers immediate benefits will create consumer demand

(Ottman, 1998; Reinhardt, 1998), since some consumers will not sacrifice their needs and

desire just to be green. Cost and energy savings through more efficient appliances, better

product quality and durability, better repair, as well as reduced health impacts are the

attributes that seem to match buyers expectations (Kammerer, 2009). In this case, to

implement environmental innovation activities more towards product improvements and

environmental issues that have a potential for customer benefit will increase acceptance

and reduce the gap between awareness and purchase behavior.

Table 1 - Gap between consumer environmental concern and purchasing behavior

Study by Aim Influence

Carrigan &Atalla (2001)

To investigate whether or not consumer care enoughabout marketing ethics to influence their purchase

Low

Kurani &Turrentine, 2002)

To explore customers willingness to pay more forhigher fuel economy.

Weakly

Rijnsoever

et all (2009)

To observe the consumers attitudes and behaviors

towards car purchasing in Netherlands.

Moderate

Dembkowski &Hanmer-Lloyd(1994)

To develop an environmental value-attitudesystem model to understand conscious consumerbehavior

No

Source:adopted and modified from Chamorro et al [2009].

2.3 How firms can create value?

Strategically, firms aim to search for source of competitive advantage by creating

sustainable superior value for its customers. To understand how firms can create value it

is important to understand such value concept. It can be defined as the utility of

combination of benefits delivered to the customers less the total cost of acquiring a


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aass

iceValueiceValue PrPr

product or service (Walters & Lancaster, 1999). It is created when a product or service

meets customer expectation. If companies do not delivery the value that buyers are

looking for certainly they will buy from those competitors that they perceive as

offering of the best value or best next alternative (Lindgreen & Wynstra, 2005). In order

to capture the essence of this, value definition can be expressed in the equation (1) based

on Anderson and Narus model (Anderson & Narus, 1998):

Eq. (1)

where Values and Prices are the value and price of the suppliers market offering and

Valuea and Pricea are the value and price of the next best alternative. The difference

between value and price should be equal to the customers incentive to buy. In this sense,

the customers incentive to purchase a suppliers offering must exceed its incentive to

pursue the next best alternative (Anderson & Narus, 1998).

The creation and maintenance of perceived value in the customer mind is not an easy

task and because of this, companies must focus on developing the key competencies and

capabilities that enable them to deliver their value proposition to the customer efficiently

(Treacy & Wiersema, 1996). One way for firms to create better offerings is to base it on

the augmented product notion which includes auxiliary services such as warranties,

customer service, financing, delivery arrangements, technological innovation,

environmental benefits and other things that people value in the process of purchase

(Levitt, 1960). The Toyota Motor is an example of value creation. When it introduced its

full hybrid electric mid-size car in Japan in 1997 and worldwide in 2001 the company has

successfully increased its market share. In the US market, it becomes a top seller with

more than half of the 1.2 million Prius sold worldwide by early 2009. The model is also

an example of products perceived benefits from customers and environmental agency.

According to the United States Environmental Protection Agency, in 2007, the 2008

Prius is the most fuel-efficient car sold in the U.S. and beginning in 2009 the latest modelbecame the most fuel-efficient automatic car. In UK, the Department for Transport

reported that the latest Prius is the second least CO2-emitting vehicle on sale in the UK

with 89 g/km. One can observe that, innovation in response to environmental regulation

can offset initial investment in research and development by helping firms to use inputs

better and to create better products (Porter & Van der Linde, 1995)
http://en.wikipedia.org/wiki/Full_hybrid#Full_hybridhttp://en.wikipedia.org/wiki/Hybrid_electric_vehiclehttp://en.wikipedia.org/wiki/Mid-size_carhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/Department_for_Transporthttp://en.wikipedia.org/wiki/Gramhttp://en.wikipedia.org/wiki/Kmhttp://en.wikipedia.org/wiki/Kmhttp://en.wikipedia.org/wiki/Gramhttp://en.wikipedia.org/wiki/Department_for_Transporthttp://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agencyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Mid-size_carhttp://en.wikipedia.org/wiki/Hybrid_electric_vehiclehttp://en.wikipedia.org/wiki/Full_hybrid#Full_hybrid


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To create, exploit and delivery value to the final customers firms must develop, design

and implement the marketing programs in an integrated perspective where all within the

organization should be involved. Therefore, all the company should see themselves as

part of a value delivery process (Kotler & Keller, 2006). In 2008 for instance, Fiat

launched the Marketing bubbles initiative whose project was to use the action

learning methodology (based on actual business cases) and combine training, creative

thinking and business development in one initiative using the skills of marketing

personnel and employees from other departments. The objective of this training model is

the online collaboration platform for sharing documents, data and best practice. It

resulted in two pilot projects in which over 100 people were involved in identifying

opportunities to improve profit and to devise value-creation strategies, which helped the

firm to redefine the positioning of Fiat Bravo in Europe. The Lighthouse was anotherproject launched at the same year, which involved all employees in the business unit

through various training courses and communications programmes. As a result, the

project reinforced the Group values, redefined the organizational structure and processes,

team-building and enhanced innovation and customer feedback process (Fiat Sustainable

Report, 2008).

The holistic marketing highlights such process, which interactions between customers,

suppliers, distributors, company, employees, etc and others activities based on mutual

benefits can offer possibilities in creating, maintaining and renewing customer value.

To describe the holistic marketing framework and its entire value chain, I display in the

Figure 1, the three paces of the value chain: the exploration, creation and delivery value

procedure. One can observe that the process is linked one to other in order to show a

redistribution of benefits among different components and players in this value chain. The

value exploration is related to cognitive, competency and resource spaces, where

companies define its strategy by identifying and understanding the needs of its buyer

targets as well as taking into account the competences of themselves and of their

collaborators. The value creation is concerned to identifying new customer benefits by

getting feedback from them in order to improve services and products. The delivering

value is related to the management process, which concern to internal resource from the

company business domain and the management relationship process oriented to


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companys customers and to companys partners. It is important to mention that in order

to maximize value to customers; companies need to get maximum value from their own

suppliers. Under this perspective, winning companies will be the ones that combine not

only customer relationship management (CRM) but also partner relationships

management (PRM). The latter refers to the process in which firms establish

collaboration with other firms with the objective of getting economic advantage, i.e. it

should be a win-to-win relationship where both sides are benefited. In this way, a

collaborative network summed up with core competence seems to be a good combination

to maximize innovation, to maintain growth, to keep competitiveness and to improve

customer satisfaction.

2.4 Market Orientation

Traditionally, market-oriented corporate strategy has been recognized as a pillar of

superior company performance by both academics and practitioners. Slater and Narver

(1994), define market orientation as an organizational culture. Such definition is

particularly interesting since organizational culture is related to the adoption of the

marketing concept, i.e., the process of matching company's capabilities with customer

wants, as a business philosophy. Alternatively, market orientation also may be

understood as a group of activities, processes, and behaviors derived from implementing

a marketing concept (Kohli & Jaworski, 1990). These two approaches are reconcilable

according to Matsuno (Matsuno et al., 2005) since culture can lead to behavior and,

Figure 1. A Holistic Marketing Framework

Source: P. Kotler, D.C. Jain and S. Maesincee, Formulating a Market Renewal Strategy , inmarketing moves (part1), figure.1-1 (Boston: Harvard Business school Press 2002).

ValueExploration

CustomerFocus

ValueDelivery

ValueCreation

CognitiveSpace

Customerbenefits

CustomerRelationshipMana ement

CoreCompetencies

CollaborativeNetwork

CompetencySpace

InternalResourceMana ement

Businesspartner

Resourcespace

BusinessPartnerMana ement

Businessdomain


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behavior represents the basis to the development of the organizational culture. In any

case, a market orientation must involve the organization as a whole (Webster, 1992)

Deshpande (Deshpande et al., 1993) specifically affirms that to develop a profitable

enterprise in the long run, customers interests should be placed at first. In other words,

market orientation basic point is to profitably create superior value for customers. Note

that this make a parallel with the value chain process pointed out in the previous section.

In the marketing theory, to create continuous superior value for customers, a business

need to be customer oriented, competitor oriented and also interfunctionally coordinated.

That is, to survive and succeed, organizations must know their markets, attract sufficient

resources, convert these resources to appropriate products, services, ideas and effectively

distribute them to the final consumer (Narver & Slater 1990)

Now, let me describe the three components of the market orientation approach. Thefirst, which is the so-called customer orientation, suggests that firms should get a detailed

understanding of their target customers in order to be able of consistently creating

superior value. In fact the deep understanding of the customer needs is an essential

element for the business and it is the central element of market orientation. Customer

profitability, that is, profit derived from customers, is determined by customer retention,

margin and acquisition (Kotler & Keller, 2006). From this concept, customer relationship

emerged in the last decades as a technique to enhance performance in customer retention,

satisfaction and value (Bolton, 2004). Osarenkhoe (2008) suggests that firms moving

from a product and sales philosophy to a customer-intimacy philosophy will increase

their probability to outperform competitors. The author assumes that the objective of

firms applying customer-intimacy philosophy, which is a central part of the market

oriented approach, is to be present in the customers mind. To achieve this, the firm will

competently use its resources and organizational culture to create competitive advantage.

In the current consumption patterns, customers have shown the desire to cultivate "green"

consumption habits. Customer-oriented firms must be aware about the trends in green

consumerism by addressing and positioning their offers based on these new green trends.

The second component is linked to the competitor orientation approaches, which

suggest that firms should understand the short-term strengths and weaknesses and long-

term capabilities and strategies of both current and potential competitors. The scanning of


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the competitor can be compared with the industry-based view, which is linked to the

Porters five forces. That is, by analyzing the competitor firms must be aware about

industry profitability that depends on the threat of new entrants to the industry, the threat

of substitute products or services, the bargaining power of its suppliers, the bargaining

power of its customers and the intensity of rivalry among its competitors (Porter, 1991).

With regard to the green trends, earliest initiatives at launching green technologies by

pioneering firms can be a drive force to cause a competitive response.

The third component is the interfunctional coordination, which implies that the

resources available to the organization should be well coordinated in order to deliver

superior value for customers (Naver & Slater, 1990). In this component, the resource-

based and the competence-based perspective can be incorporated. In the process of

collecting information about customers needs, competitors, etc firms must have theability to transform such information in a strategic plan which brings a debate within

departments whether organizational changes are or not needed, which technology could

attend customers current and future needs and in the meantime meet environmental

requirements, or which strategic alliances will be required, what are the resource

available in the firm, what are the core competence and how it can be aligned with the

trend in demand, for instance, for green products, etc. Such integrated discussion will

lead to a collective learning in the organization, especially the capacity to coordinate

diverse production skills and integrate streams of technologies.

A resource based view focusing on development and application of core competences

can form the basis of competitive advantages since core competence provide potential

access to a wide variety of markets, make a significant contribution to the perceived

customer benefits of the end product, and are difficult for competitors to imitate

(Prahalad & Hamel, 1990). Chen (2008) extends this concept in the green issues by

suggesting new novel construct called green core competence. He proposed that green

core competence is the collective learning and capabilities about green innovation and

environmental management within department and extended in the organization as a

whole.

The market-oriented process is illustrated in the Figure 2; note that market orientation

is considered as the gathering of information and its dissemination intelligently. The


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market intelligence is composed by the scanning of information about customers needs

and also by factors that influence such needs such as government regulation, society,

competitors, etc. The maximization of the information process occurs when it is shared

among all business departments. In this process, market orientation provides a link that

joins all efforts and projects from people in different department within the organization

and thereby leads to the creation of superior performance (Kohli & Jaworski, 1990).

Figure2Market Orientation

2.5 Market Orientation and Environmental Practices

Recently the choice of environmental practices or changes in the way that processes and

products are designed to make them less harmful to the environment has been a trend in

business management (Gonzlez-Benito et al, 2008). Strategies that prioritize the

implementation of eco-friendly practices are linked to the firm's perception of current

environmental pressure from media, regulatory institutions, financial institutions,

suppliers, competitors, etc. The ability of firms to scanning the external business

environment to identify threats and opportunities and its sensitivity to respond to such

external pressure are characteristics of market-oriented firms (Kohli & Jaworski, 1990).

Thus, market orientation should be a drive force to set the cultural and operational bases

for increase awareness and committed reactions to the current environmental trends.

Inter-functional

Coordination

Developing new

technologies

Exploiting new

markets

Setting new marketing

communication

Knowledge about

Customers

(needs, tastes,

wants, etc)

FirmInternal Environment

Knowledge

about

Competitors

Stablishing new

strategic alliances

Source: Adapted from Kohli and Jaworski market-

orientation framework.


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Stone and Wakefield (2000) make a link between market orientation and environmental

practices and adapt the market orientation concept to an eco-oriented one, which refers

to organization that generates, divulge and responds to environmental information.

Atmospheric pollution and its consequences for human health, scarcity of freshwater

and raw material, and global warming are among others climate challenges that demand a

response from the society as a whole. In some way, all these environmental impacts have

a great influence on how companies manage their business, and therefore, they are also a

driver to innovation.

To develop green products as well as to address environmental awareness firms need to

create a successful strategy. Strategic planning requires simple, consistent and long-term

firms goals, a deep understanding of the competitive environment as well as realistic

objectives that is aligned with firms resources and capabilities (Grant, 2005). Creating agreen strategy is no different. Clear vision and objectives are useful to help managers in

making better decisions (Olson, 2008). According to Olson (2008), a green or

environmental strategy should lead a common culture of awareness and actions that

encourage initiatives to benefit the planet and at the same time add attractive value

proposition to the firm. Note that, attractive value proposition may be understood here as

the development of new technologies or initiatives that can reduce cost and increase

performance. Solar panels, electric cars, hydrogen vehicle conversions, recycling,

rainwater collection are examples of alternative green technologies that are cost effective.

The first step that firms should take when implementing an environmental strategy is to

increase green awareness and actions as corporate culture. To do this, they should include

environmental issues as part of their training curriculum that focus on organizations

environmental goals. Olson (2008) highlights the importance of organizations in

developing practices that cultivate a common culture of environmental consciousness to

support its green strategy (see Table 2). One important aspect of the responsible

environmental practices is that it can increase corporate reputation. Fombrun (1996)

proposes that a corporation's reputation is associated with credibility; trustworthiness; and

responsibility. It is clear that firms producing superior quality products, using credible

advertising, acting in a socially and environmentally responsible manner and having a


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history of examples which their obligations meet various stakeholder interests tend to

create reputational advantage (Miles & Covin, 2000).

Table 2: Responsible Environmental Practices

Initiatives Best practices

Provide training Employee new hire training that motivate conservation behavior

such as turning off lights, recycling paper, etc.

Be an example Corporate sponsorship of environmental initiatives in the

community such as investment in reforestation.

Measure and report

performance

How much paper was recycled?

What newspaper has been written or which institutions have

recognized the firms contribution to the environment?

Create communication

and change management

plan

Always communicate success,

Have support available to answer questions and provide facts

Anticipate organizational needs

Source: Olson (2008)

Green marketing strategies and tactics also might require changes in the marketing mix

(product, price, place and promotion) and marketers must be conscious about such trends.

Miles et al. (1997) point out that firms acquiring for instance an ISO 14000 certificate

must produce goods with maximum recycled content and designed to have minimal

environmental impact. Additionally, environmental claims must be supported by the

lifecycle of the product and firms will see an augment in cost because of ISO compliance.

Certification can affect its product price at the beginning but it will be compensated when

process to allocate resources efficiently are introduced. In terms of distribution, strategies

will also be modified since firms will try to minimize energy use and the total

environmental impact of the product throughout its lifecycle (Miles et al., 1997).

Consequently in the business to business relationship, buyers will require ISO14001

certification from their immediate suppliers and these immediate suppliers will in

somehow also demand that their suppliers get certificate and the standards movement will

involve the whole supply chain (Rothery, 1995).


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An eco-certification or eco-label such as ISO 14001 or EMAS (Environmental

Management System) provides guidance and advice on a wide range of environmental

issues including auditing, labeling, life-cycle assessment etc. Obtaining such certificate

can be fruitful for firms following a green strategy. Steven (Steven et al., 2003) shows

many significant relationships between the presence of a formal EMAS and improved

performance. Recent studies also found empirically a positive correlation of EMS in

general on environmental product innovation activity (Rehfeld et al. 2007 and Wagner,

2008).

It seems that firms environmental facilities, consider facilities here such as

environmental training program in place for employees, written environmental policy,

public environmental report, environmental performance indicators/ goals, etc that is

related to the EMS seems to be a key role for eco-oriented organizations to addressgreen products in its marketing campaign supported by actions that indeed prioritize the

environmental impact. The latter may help firms, in the automotive industry for instance;

to meet the triple bottom-line that refers to delivering value simultaneously to customers,

business and the planet (Elkington, 1994).

3. GENERAL AUTOMOTIVE INDUSTRY

The automotive industry is characterized by numerous new inventions. In 1908, the T

model implemented by Henry Ford made the world enter in the age of affordable

transportation altering our notions of place and distance. Nowadays, promising new green

technologies will revolutionize the transportation system as well as certainly will solve

the problem of global warming by creating a less carbon-intensive environment (see

Appendix B).

A new generation of lithium-ion batteries, coupled with rising oil prices and the need to

address climate changes, has accelerated a global race to electrify transportation. The

global automotive giants are already developing electric car battery vehicles (CompaniesAnnual Reports). One can observe that in terms of the cycle life, the car industry is

experiencing a rejuvenation of itself because of the wave of innovation. The actual car

version reached the maturity phase of the market but the new hybrid electric vehicle will

be in the introduction/growth phase. The demand for hybrid vehicles is increasing

worldwide as consequence of the limited emission standards, higher fuel prices and


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growing environmental-awareness. Hybrid vehicles will significantly reduce

transportation-related oil demand; it will make cars faster, cleaner and safer, as well as

more fuel-efficient. Demand will be encouraged by benefits offered for the technological

innovation, including faster acceleration, better fuel efficiency, increased customization

and the potential inclusion of new electronic systems that enhance functionality and

safety (Raskin& Shah, 2006). In Sweden such trend is already taking place. For instance,

the proportion of cars that run on renewable fuels is increasing, even though Swedes are

still buying relatively large cars with high fuel consumption, says Carl Magnus

Berglund, investigator at the Swedish Consumer Agency (Swedish Environmental

Protection Agency Homepage). For many consumers, a change from car to more

environmentally friendly forms of transport involve a conflict between individual short-

term interests and social or collective long-term interests, especially when individual carusers are asked to significantly adapt their lifestyles and transport behavior.

According to Sika Institute (Sika Report, 2005), the forecast for passenger transport to

2020 highlights that car is at present the dominant form of passenger transport and this

will maintain over the next fifteen years. From 2001 to 2020, the transport performance is

expected to increase by 27 percent and car will account for the highest absolute

proportion as displayed in Figures 3, 4 and 5.

Figure 3: Short-distance transport

performance (2001-2020)

Figure 4: Long-distance transport

performance (2001-2020)

Billion Pass.km Billion Pass.km

Source: Sika Institute (Sika Report, 2005)


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Figure 5: Evolution and forecast of passenger transport in Sweden from 2001-2020

Source: Sika Institute (Sika Report, 2005)

Despite of such good forecast for future, the automotive industry certainly is among

those that have been suffering most the effects of the global economic crisis. The current

situation is already forcing automakers to rethink its business model completely. The

negative demand shocks and more restrictive environmental policies are forcing firms to

adjust their strategies to increase productivity. Smith (1991) highlights that firms will be

more rational after an actual profit decline, especially if their survival is at stake. In other

words, crisis usually make firms rethink their traditional way of looking their external

and internal business environment since firms need to be more creative or abandon the

present status quo strategy (Erixon, 2007). External forces, i.e. forces that are out of thefirms internal environment, are demanding new technologies that should focus on the

environment. It seems that three key factors will enable the industry to make the

necessary changes: investment, creativity and courage since investment in new

technologies are not risk-free.

To transform the crisis into opportunities, government policies seems to be an

important tool to influence an entire industry and the habits of consumers, while

promoting the shared objective of reduced emissions and fuel consumption. In Sweden

the government is helping to create green car demand when introduced a program of tax

rebate of SEK 10 000, from 2007 to 2009 specifically, to individuals who buy a new

green car. The objective is to encourage more people to buy fuel-efficient cars and cars

that run on green fuels. Although the definition for the green car is not linked with a

specific technology or a certain type of fuel, the rebate aims to stimulate the reduction of


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fossil fuels and reduce carbon dioxide emissions (Government Office of Sweden). The

figure 6 shows new registrations of passenger cars by alternative fuel from 1996 to 2008.

The demand has significantly increased for both private owned and corporation owned in

the period of taxes rebates (see Figure 6 and 7).

According to the Naturvrdsverket (Swedish Environmental Protection Agency), the

new cars have contributed to reduce by just over three percent since 2008 (174 grams)

and by seven percent since 2007 (181 grams) the carbon dioxide emissions. However,

one can ask why Swedish government has encouraged green vehicle purchase mainly

when surveys commissioned by Naturvrdsverket shows that one in every two people

consider themselves to be environmentally and climate-friendly. Such scenario supports the

idea that even though there is a high awareness about the negative impact of cars to the

environment, contradictorily this is not translated in changes in car usage and purchasingbehavior. This gap between environmental attitudes and vehicle ownership can be a

puzzle and it seems that changes in diminishing environmental impact has come not

from changes in behavior but from changes in vehicle emissions technologies and fuel

efficiency gains. By assuming that if people know more about the environmental

implications of their behavior, they will act more pro-environmentally. Then information

is a prerequisite for changing environmental behavior and effective green marketing

communications is a plus for firms that need to meet environmental regulations and also

to gain market share for their green offers.

Figure 6:New registrations of private owned passenger cars by alternative fuel (1996-2008).

Data obtained from Sika (The Swedish Institute for Transport and Communication Analysis)


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3.1 Automotive Industry Attractiveness

To analyze the structural determinants of the industry attractiveness it is necessary to use

the Porters Five Forces framework (Porter, 1979). It includes the five forces of

competition that comes from two source categories. One, called the horizontal

competition, includes competition from substitutes, competition from entrants, and

competition from established rivals. The other one, called the vertical sources, includes

the bargaining power of suppliers and buyers (see Figure 8).

Todays automotive industry has become more concentrated with firms making

strategic alliances with competitors. Nissan-Renault, Toyota-Subaru and Chrysler-Fiat

are among others examples of strategic alliances. It can be also noted that the size of the

carmakers are becoming bigger due to mergers and acquisitions (M&A). Given that the

competitors are becoming bigger and getting more power, they not only can shape the

industry but also to increase barriers to the eventual newcomers. In the overall the market

mostly consists of a relatively small number of large-scale companies since due to the

high capital requirements to reach economy of scale, incumbents generally not face much

of a threat of new entrants.

In terms of the innovation, the importance of the research and development has been

crucial to survive in the industry characterized for intense competition. The cost in R&D

also has increased since to meet customers and environmental requirements demands

high technologies. One of the strategies to reduce the costs is to share R&D activities

Figure 7:New registrations of corporation owned passenger cars by alternative fuel (1996-2008).

Data obtained from Sika (The Swedish Institute for Transport and Communication Analysis)


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expenses by collaborating or creating joint ventures with others; it can be suppliers,

competitors, customers etc.

Due to globalization, the new cars market has a large number of buyers and the latter

are price-sensitive. Another aspect of the industry is the presence of a variety of

manufacturers with a high level of product differentiation and therefore a high level of

choice for consumers, which enhance the industry rivalry (Datamonitor Report, 2008).

In the market there is a variety of possible substitutes, i.e., buyers have many choices,

for example, when deciding for an alternative fuel-engine. Firms research has focused in

developing more fuel-engine technologies such as hydrogen, hybrids, biogas, electric

vehicles, etc in order to meet environmental regulation (Firms Annual Reports, 2008).

Firms that only focus on the conventionally-powered cars can consider electrically-

powered vehicles as a threat. Public transportation or cycles are other examples ofsubstitutes.

The key inputs of the industry are typically commodities items such as metals and

others raw materials. The importance of the raw materials quality and components to the

manufacture of cars to assure safety can enhance supplier power. In terms of the demand

side, it is possible to affirm that even though buyers are price sensitive they don't have

too much bargaining poweras they never purchase huge volumes of cars. In contrast, if

the buyers are other firms then their bargaining power increases according to their

purchase volume.

Bargaining power of suppliers

Bargaining power of buyers

Figure 8: Porters Five Forces of Competition Framework.

Source: Adapter from Porter (1979)

Suppliers

Industry Competition

Rivalry among

existing firms

PotentialEntrants

Threat of

new entrants

Substitutes

Buyers

Threat of

substitutes


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4. METHODOLOGY

Given the need for more detailed insights into companies green initiatives and strategies

in the automotive industry, a qualitative study was conducted. The chosen market for

conducting the research is the automobile industry in Sweden. The justification for thislies in several factors. Economically, the automotive industry is seen for many govern as

a pillar for the country economic growth since it brings technology, jobs and

investment to the economy as a whole. This industry is one of the major users of

computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, rubber, etc.

Politically, laws and government regulations have affected this industry since the 1960's.

Almost all of the regulations come from consumers increasing concerns for the

environment and for safer automobiles. Technologically, awareness about the global

warming and also the price of oil has caused the automobile industry to develop alternate

fuel vehicles. In other words, environmental concern is one aspect and the second reason

that is the most powerful to cause short-term changes come from the situation in the oil

industry. The world oil demand projections show that the new demand from transport

sector coming from developing economies such as China, India, etc would likely raise oil

price in 2020 by 3-10% if oil supply investment is constrained (EIA, 2005). The new

needs for vehicles operating with alternative fuels are urgent. Transportation not only

requires a high consumption of non-renewable energy resources, emissions from vehiclescontribute to both local and global environmental problems. Thus, there is a growing

demand in the transportation industry for new technologies that use alternative fuels.

Socially, there is a public debate about the impact that the gas cars have on the

environment. Furthermore, several macroeconomic and sociopolitical challenges are

directly linked with the automotive industry such as the redistribution of global economic

power, energy dependence, global trade balance and environmental concerns. Another

aspect is that the automotive sector is also one of the industries that have been strongly

affected by the economic downturns. The global economic crisis brings a debate on

whether change is needed and opens up opportunities for collaborative network among

governments and competitors as well as between government and industry which all of

these aspects make my analysis in this industry worthwhile and timely.


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4.1 Research Strategy

The unit of analysis in this study is the business level. This research employs a qualitative

study by collecting data from nine companies in the industry (see Table 3). Note that, I

strategically chose these firms because they are multinationals whose operational scale

requires massive consumption of natural resources. Thus, social and environmental

communications are critical activities within their ethical behavior.

The investigation is divided in three parts. Part one includes the analysis of firms

sustainability and/ or annual reports, part two interviews via email with business people

in Sweden and part three use the Anderson and Narus model introduced in the section 2.3

and its value creation approach to link firms environmental actions obtained by the

interviews (see appendix A) and/ or from the firms reports (see appendix C).

To capture firms environmental attitudes and performance, I have identified four

variables in the analysis of the annual and/or sustainability reports. In the following, such

variables are described.

1. Environmental Statement Plan. I assume that similarly to the vision and missionstatement, it must provide a guide that can orientate firms in achieving green aims

and objectives. It is important to highlight that I am not looking to seeing

environmental or sustainability term as part of the firms vision or mission

statement but the existence of at least an environmental guiding principle.

2. Green training program. I consider that green training is about changingorganizational cultures and individual behavior to combine environmental, profit

and efficiency objectives. Thus, I observe if firms clearly mention any training

programs that encourage internal green attitudes.

3. Green marketing campaigns. I consider the green marketing campaigns as animportant tool whose aim is to inform the public about firms new green offers.

Thus, I check if firms have communicated their green technologies trough sponsor

events, seminars and campaigns.

4. Encouraging supplier to obtain green certificates. I assume that requiring suppliersto obtain ISO 14001 or any other green certificate can assure green performance

and efficiency in the whole supply chain and benefit the firm as a whole.


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It is important to highlight that in the sample of nine companies (see Table 3) I address

questions, which are displayed in the tables title, related to the above key variables. The

tables illustrate some trends about environmental firms actions. In the interviews, the

way that the questionnaire is structured enabled me to get valuable qualitative

information that would be comparable across companies. The format of the questions is a

mixed of dichotomous, i.e., a yes/no type answer and multiple-choice.

The questionnaire is structured in three sections. The first consists of the descriptive

data of companies (including the number of employees, year founded, industry sector,

etc.); the second is the measurement of the green management systems used by firms; the

third part is the marketing mix usage with respect to the green perspective. The aim is to

understand how firms can influence customer adoption and continued use of green

products. The key issues are defined as follows:

To investigate whether the development of firms green products is supported bythe environment management system;

To analyze whether the marketing mix are used to stimulate demand for newgreen technologies;

To observe the importance of the firms suppliers in undertaking environmentalmeasures;

To link the Anderson and Narus model I have assumed an automotive market where

two kinds of firms operate and position their marketing offers. The standard firms are

those that deliver the basic benefits such as conventional or non-green technologies to

their customers and the outstanding firms are those that provide extra benefits via new

green technologies. The increase in market share is associated with firms ability to

communicate and be perceived as the best alternative by consumers. Each benefit offered

by firms receives a grade 1 and zero otherwise (see table 4) and the firm that get thehighest points probably are those that customers will have incentive to buy from. In the

market, consumers are strongly concerned with the environmental problems and they can

observe firms behavior via their published annual and sustainable reports. The data

obtained from the interviews and firms reports are used to grade the firms.


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Table 3: Participating Companies

Ford Motor manufactures and distributes automobiles in 200 markets across six continents. Its core and affiliatedautomotive brands include Ford, Lincoln, Mazda, Mercury and Volvo.

General Motors Corporation (GM) designs, manufactures and markets cars, trucks and other automobile parts inNorth America, Europe, Latin America, and Asia Pacific regions. Its core brands include Cadillac, Chevrolet, Opel,

Pontiac, Saab, Saturn

Bayerische Motoren Werke (BMW) focuses on the worldwide automobile and motorcycle markets. BMW sells itsvehicles under three premium brands, BMW, Mini and Rolls-Royce.

Honda Motor is one of the leading manufacturers of automobiles and the largest manufacturer of motorcycles in theworld. The companys popular passenger car models include Legend, Accord, Civic, City, Acura RL, Acura TL and

Acura TSX.

Fiat Group Automobile designs, produces and sells vehicles under the Fiat, Alfa Romeo, Lancia and Abarth brandswhich are made up of four companies: Fiat Automobiles, Alfa Romeo Automobiles, Lancia Automobiles and Fiat

Professional.

Renault designs, produces and sells vehicles under markets its products under the Clio, Megane, Logan, Espace,Kangoo, Scenic, Twingo and Laguna brands.

PSA Peugeot-Citroen ((Peugeot) is a France-based manufacturer of passenger cars and light commercial vehicles. Itproduces vehicles under the Peugeot and Citroen brands.

Nissan Motor is engaged in the planning, developing, manufacturing and marketing of passenger automobiles,automobile parts and forklifts. The group has significant operations in Japan, North America and Europe.

Toyota Motor is one of the largest automobile manufacturers in the world. The company sells its products underToyota, Lexus, Hino and Daihatsu brands.

Source: Firms website

4.2 Research Approach

The research approach is based on both, primary data whose focus group are people who

work in the business, marketing or sustainability and environmental policy department, as

well as secondary data which consist of previously published material such as annual

and/or sustainable reports on firms international website. Besides that to obtain a better

picture of the trends in Sweden I have used statistical data from Swedish Sika Institute

and general policies information from The Swedish Environmental Protection Agency. In

this thesis, I address the three following questions:

1. Does the introduction of the environmental facilities help firms towards greeninnovation?

2. Is green marketing strategy of firms positively associated with the increase inthe performance?

3. Does green marketing communication affect positively corporate image?


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To answer the first question I will use the questionnaire interview since it try to capture

the overall firms motivation to introduce green facilities, to adopt an environmental

management system, green marketing mix policies, etc which are in a way linked with

innovation process. The other remaining questions will be answered by using the firms

reports available on its international homepage.

For the purposes of the present study, the core of the investigation is based on the

firms reports (secondary data) rather than interviews (primary data). First, I assume that

the reports are reliable sources since it is one of the channels that firms communicate with

their shareholders, and the public in overall mainly to explain the company's efforts to

address environmental concerns. Second, most of the information in the questionnaire is

in somehow mentioned by firms in their reports then the interviews represent extra

information to support and validate my analysis. Finally, the emphasis on secondary datacan be good to my research since it can provide a background to primary research as well

as it may help to illustrate active trends (Newsom-Smith, 1988).

4.3 Research Process

I started my research by contacting people who work for the automotive industry in

Sweden in order to present my research outline. I contacted nine firms (see Table 3) via

their Kundservice (customer service) and then I got the phone numbers of the people

responsible for the marketing and/or business department. After contacting them, I sentthe questionnaire via email, which was requested to be returned after one or two weeks.

Most of the people contacted accepted to receive my questionnaire, however, only the

Toyotas coordinator of the marketing department in Sweden sent it back. Time

constraint was one the reasons for such fewer response but the main point that they

claimed was that being a small importer office in Sweden unable them to respond such

specific questions. For most of them the questions were much more suitable to the

manufacturer sector which is located outside of the country.

To broaden the scope of my research I decided to contact firms via their international

homepage. From one side, only one company, Ford Motor, accepted to answer the

questions. Initially, I contacted its customer service, which redirected my questionnaire to

the sustainability and environmental policy department and a business manager accepted

to answer it. On the other side, some companies said that the excess of inquiries had


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exceeded their capacity in the sense that they could not to attend my request. Other firms

advised me to search such information on their reports and the others did not replay even

though I sent emails to their communication service twice.

To help me to get a better picture of the green consumerism, green policies, alternative

fuel consumption, etc in Sweden I also contacted the Sika Institute. By email I got

statistic of green vehicles before and after the green tax rebates implemented in 2007. By

phone, I obtained some further information to help me to understand the Swedish future

green policies regarding to the transport industry. I also contacted by email the Swedish

Environmental Protection Agency.

5. Descriptive Results

Before presenting an overview about the empirical findings I will divide the analysis into

two subsections. In Section 5.1, I describe the main points of the interviews and make

comparisons between Toyota Motor Corporation and Ford Motor Company. In section

5.2, I display my analysis about the four variables (environmental statement plan, green

training program, green marketing campaigns, encouraging supplier to obtain green

certificate) analyzed in the firms reports. In the subsequent section namely analysis and

discussions; I make a link between the empirical results and the theoretical framework.

5.1 Interview at Toyota Retailer (MW Gruppen Stockholm AB)

MW Gruppen Stockholm AB is a Toyota retailer founded in 2004 with 115 employees

where Finance/Account is the department with an explicit responsibility for

environmental concerns.

The firm used tools such as environmental criteria to evaluate and/or compensate its

employees, environmental performance indicators, environmental accounting, internal

and external environmental audits, environmental training program, written

environmental policy and public environmental report when implemented an

environmental management system in 2001. The main motivations to use EMS were tobetter identify future environmental needs, cost saving in terms of use of inputs and waste

management. Add to that, regulators incentives also made it attractive, however, the

differentiation of products was judged as a moderately important issue. When the firm

was asked to rank from the most important to less important reasons to implement

EMS, meet regulatory compliance was the most preferable alternative while firm image


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was the second followed by product quality. Established relationship with buyers ranked

in fourth, competition in fifth and finally product price seemed to be the less important

item to be considered. In sum, regulatory compliance was the item ofmost interestwhile

product quality was the item of less interest, however, it was not possible to say if the

difference between the first and second alternative and between the second and the third

one, for example, is the same, more, or less important.

The firm also has used significant technical measures to reduce the environmental

impact associated with changes in its production technology. Solid waste generation and

local or regional air pollution were only two out of six alternatives chosen by the firm to

inform its concrete actions to diminish ecological impact. In terms of the overall business

performance after using the EMS, it assessed the implementation of green technology as

the most importantpoint.When asked about its marketing campaigns, address environmental issues has been one

important issue since it agrees that product performance play a key role in influencing

customer adoption and continued use of green products. Add to that, firms

communication efforts have put strong emphasis on green brands of its vehicles. In terms

of price policies, the firm has not used aggressive penetration-pricing methods to

stimulate demand for new green technologies once that it does not see any great

opportunity to pursue premium prices in the market. While purchasing and/or marketing

good and services the firm assess the environmental performance of its suppliers and

require suppliers to undertake environmental policies even though the retailer does not

seem to be involved in helping its suppliers of ways to reduce their environmental impact.

5.1.1 Interview at Ford Motor at U.S

Ford Motor Company was founded in 1903, currently it has 200,000 employees

worldwide and its headquarters is located in U.S. The firm pointed the senior

management as the location that best describe the explicit responsibility for

environmental concerns.

Analogous to Toyota, Ford has introduced an environmental management system and

at the time of its implementation adopted environmental criteria to evaluate and/or

compensate its employees, environmental training program in place for employees,

written environmental policy, external and internal environmental audit, environmental


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accounting, public environment report, environmental performance indicators. The firm

also has acquired its first certificates such as EMAs and ISO 14001 in 90s.

When comparing the main reasons that made the firm to adopt an EMS, I notice that it

differs from Toyota in some points. The most importantpoint considered was that, EMS

may help Ford to prevent or control its pollution and improve its efforts to achieve

regulatory compliance while Toyota assessed these two alternatives as not important.

Besides that, Ford seems to believe that implementing EMS would be very important to

help the organization to differentiate its products. For Toyota, this alternative was

considered as moderately important. Ford also believes that using an EMS can be very

importantto improve its relation with regulatory authorities while Toyota disagrees since

the latter considered it as a not importantpoint. Firms also differ in considering the use of

EMS as a tool that can improve firms image and facilitys profile. Ford considers this asvery importantwhile Toyota completely diverge. Convergence of opinions occurs when

firms consider EMS as a key role to create cost saving in terms of efficient use of inputs.

It is important to highlight that the others alternatives cannot be comparable since Ford

preferred do not give opinion about them.

Ford also has used significant technical measures to reduce the environmental impact

associated not only with changes in its production technology, as Toyota has used, but

also with changes in product features. Solid waste generation and local or regional air

pollution were only two out of six alternatives chosen by Toyota whereas Ford also

included use of natural resources, wastewater effluent, global pollutants such as GHG

(greenhouse emissions) and aesthetic effects for instance, noise, smell, landscape to

inform its concrete actions in diminishing its environmental impact.

When asked about its marketing campaigns, Ford and Toyota agree that both

addressing eco-friendly issues has been one important topic and that product performance

play a key role in influencing customer adoption and continued use of green products.

Moreover, similarity also occurs in terms of communication efforts which both have put

strongly emphasis on green brands of its vehicles. In terms of price policies, Ford and

Toyota do not see any great opportunity to pursue premium prices in the industry. While

purchasing and/or marketing good and services, Ford differ from Toyota only in the item


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to help suppliers of ways to reduce their environmental impact. I.e., Ford choose this

alternative but not Toyota.

5.2 Analyzing Firms Reports

Environmental Statement PlanAll firms under analysis have an environmental statement plan with clear objectives.

They claim to integrate environmental management goals into the product lifecycle at

every stage from design to recycling as well as the development of new and efficient

technologies. The statements are written indications that companies are in line with the

needs to have guidance to address their contribution to the environment.

Firms seem to be working intensively on renewing the product range, improving

industrial processes, strengthening the image of their brands by releasing their

environmental commitments to the public via annual reports, sustainability reports or in

other channels of communication such as press release or homepage, especially on

sections dedicated to the environment. Their guiding principles includesthe development

of green technologies, i.e., vehicle with less CO2 emission, recycling, energy

consumption, reducing waste and pollutants, air quality, among others (see Table 5,

appendix C and appendix D).

One can observe that 89% of the firms (in the sample) reported commitment to reduce

energy consumption; however, only 55% reported the introduction of eco-design in theirplants. This can be explained by the fact that such technologies are more investment

intensive. I consider eco-design here as the use of green alternative technologies such as

power-generating wind turbines, solar energy panels, etc that are assumed to be

environmental friendly. Another variable that firms have been committed is the reduction

of waste and pollutants with 67% of the firms addressing this topic in their reports.

Besides that, cutting water use has been one of the initiatives of Ford in North America. It

seems that firms have moved a step further by creating internal measurement to link their

actions with performance. Table 6, in the appendix C, displays such trends where some

firms have been proactive in developing their measurement of performance. However,

others only describe their initiatives without showing quantitatively how much they

reduced in terms of CO2 emission for instance. I also noticed that even though firms


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address their commitment with respect energy consumption, there is few published data

about energy consumption or percentage and total volume of water recycled and reused.

Regarding to the green training, almost all enterprises include green issues as part of

their training programme curriculum (see Table 7, appendix C). Except GM, did not

show information about this. In the overall, it seems that firms are exploiting their

internal capabilities to encourage awareness and participatory management structures.

In terms of green marketing campaigns, 100% of the firms have used sponsor events to

address climate change (see Table 8, appendix C). In addition, an interesting aspect to

create environmental awareness along corporations supplier chain is that the majority of

firms explicitly inform that their supplier are required to acquire ISO certificate as well as

are encouraged to implement some environmental management (see Table 9, appendix

C).

5.3 Linking value creation model with firms strategic behavior

In this section I will use Anderson and Narus model (see equation one, section 2.3) and

its value creation approach to link the data collected from the interview and/ or firms

reports. The aim is to understand how firms are perceived by consumers as the ones that

create more benefits and because of this are considered as their first best choice.

Firstly, let me consider a competitive market where there are two kinds of firms: One is

a standard firm that use conventional or non-green technologies and create its marketing

offering based on an augmented product notion which includes auxiliary services such as

warranties, customer service, financing arrangements, etc. Another is the outstanding

firms which have implemented strategically all the benefits described in the case of the

standard firms plus extra environmental values for instance: less polluted technology,

more energy efficient vehicles, or have implemented actions to reduce environmental

impacts that can be observed by consumers. Consumers are strongly concerned with the

environmental problems and they can observe firms behavior via their published annual

and sustainable reports. In the industry, firms have not incentive to pursue premium

prices and let be price equal to one for all firms. Each benefit implemented by firms is

graded as 1 and zero otherwise. The firms that have received the highest points probably

are those that customers will have incentive to buy from them. Table 4 describes the


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benefits and the total points obtained by firms following the Anderson and Narus model

(see last row).

Table 4: Linking Anderson and Narus model with firms behavior

Benefits or Value creation StandardFirm

OutstandingFirm A

OutstandingFirm B

Warranties 1 1 1

Customer service 1 1 1

Financing arrangements 1 1 1

Firm provides a less polluted technology 0 1 1

Firm offer a more energy efficient vehicles 0 1 1

Firm has acted to reduce global pollutants (GHGemission)

0 1 1

Firm adopted an aesthetic effect to reduce noise. 0 1 1Others benefits (example: technological expertise) 0 1 0

Firms communications efforts place greater emphasis ongreen brands or green technologies incorporated inproducts

0 1 1

Marketing campaigns to address environmentalfriendliness

0 1 1

The firm employed an EMS or acquired an ISO certificate 0 1 1

Total 3 11 10

Anderson and Narus Model (values - prices > valueapricea) 2 10 9

In the table above, it is clear that when comparing these two kinds of firms the

outstanding one has delivered more benefits (ValuesPrices = 9 or 10) than the standard

one (ValueaPricea = 2). Since 9 and 10 are greater than 2, it is obvious that outstanding

firms that strategically implemented extra benefits are those that create more value to

their customers. In this case, the customers incentive to buy from them is greater than

standard ones. However when comparing the two outstanding firms that offer a similar

product, consumers can still have different perceptions about the firms products.Observe that, firm A received more points than firm B (ValuesPrices = 10 > Valuea

Pricea= 9). It means that, firm A exceeded the customers incentive to pursue the best

next alternative and as a consequence firm A will have higher sales in comparison with

firm B. One can ask what has made firm A more preferred by consumers than firm B.


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Certainly this can be associated with other consumers perceived benefits that buyers

count for when shopping. Considering here that customers are sensitive about green

issues, providing market-driven solutions to such issue is an outstanding business

opportunity but other benefits can be linked with the ability of firms to communicate

value that might increase buyers perception of the value created. Or it also can be

associated with perceived more ethical behavior, perceived better green technology,

perceived credibility, etc.

Analyzing preferences associated with more perceived knowhow in new technologies,

one can say that consumers can feel confident to prefer a brand that is pioneer in green

design. Toyota is an example of this when launched its first hybrid vehicle in 2001.

Toyota Prius for instance was launched three years before the Ford first hybrid vehicle. In

the meantime, Toyota has improved the technology of its Prius and might be increasedconsumers awareness about its engineering expertise. Toyota is adding strong new

models and technology every year while still keeping its costs competitive (Annual

report, 2008). Note that, the knowhow is a source of competitive advantage and this can

be confirmed by the number of automobile sold in the last five years in U.S and

worldwide (see figure 9 A, B). One can observe that Toyota can

Documents

Addressing Eco-Friendliness as a Marketing Strategy an Investigation in the Car Industry