Preview Case Gastrol Liquid Engineering

The Enthusiast

ANTONI CAREFULLY MEASURED FOUR LITRES of Syntec into his greatest love, his new Van Dieman Formula Ford single-seater rating car Tomorrow he was racing her for the first time at Silverstone and wanted to do well. Racing the Formula Fords was exciting", but his real dream was to race for Ferrari. That is why he had left his home in Barcelona to work for a specialist engineering firm in rural England.

Leaving Spain was hard, but he was now near where he needed to be: at the heart of the world's motor sports industry. It still seemed odd to him that a sport as international as motor racing was so localized, but the evidence was all around. More than three-quarters of the world's purpose-built single-seater cars - including 10.000 Formula Fords - came from small firms like Reynard, Rait and Van Dieman. Many of the Grand Prix teams were also close by - McLaren, Williams, Lotus, Tvrell, Lola, March, Arrow and, best of

Castrol's positioning varies from market to market, in this case they aim a specialist oil at motor sports enthusiasts.

all, Benetton. Local engineers also did much of the design work on the new Ferraris. Local firms even dominated the United States 'Indy' car championships. Few of the 450.000 people watching the Indianapolis 500 race knew that almost all the cars and engines originated in rural England. Antoni got his Syntuc oil from an American friend, and fellow motor enthusiast, living nearby. He was glad of the gift, since the synthetic motor oil cost four times as much as regular lubricants. In motor racing every little helps and the oil could make the difference between winning and losing. Even if he had not been given the oil, he would have bought some.

Syntec

Syntec is Burmah Castrol's 'flagship' product. Targeted at enthusiasts and technically advanced users of motor oil, the product appeared on the United States market with a $20 million budget. Despite its high price, Syntec sells well and broke even in 1994. It will never have a high market share, but the 'flagship' product allows Castrol to create gradations in the market at intermediate prices.

Syntec fits Castrol's strategy of having a high price and high marketing expenditure. Sponsorship of rallying, Grand Prix racing and the Indy car series in the United States positions Castrol as a quality, high-performance product used by die experts. Its TV advertising shows Castrol GTX as 'liquid engineering' and so encourages motorists to cosset their engines by using a premium-priced product. In the United States the campaign has helped Castrol increase its share of the DIY market from 5 to 15 per cent in ten years. Sales are now just behind Pennzoil, the market leader.

The 'Ifawe Somes' and 'Near Haves'

Castro] has operations in 50 countries and sells to another 100. Some of its greatest successes are in developing countries, where economic development fuels growth. The company's positioning in the developing world is not the same as in developed countries. According to Ian Pringle, Castrol's Asia director, 'have somes' are the key to its marketing in Asia. They are die real middle class of Asia who want to buy cars, houses and consumer durables. They treasure and care for their possessions. The segment is growing fast. For instance, in India the domestically produced Maruti-Suzuki 800 cc car is the status symbol of the rapidly growing middle class. By a combination of political patronage and Japanese technology, the company has 71 per cent of the Indian car market, which grew by 30 per cent in 1993. Castrol estimates that in 1994 Asia had 55-60 million of these 'have somes', but that there would be ,300 million by the end of the century.

Castrol's marketing also covers the Asian 'near haves', who arc likely to buy a motor cycle as their first vehicle. According to Mr Pringle, these groups are important because of the way that rapid economic development leads to consumers 'leapfrogging' intermediate technologies: for example, people progressing from having no telephone direct to a cellular phone, or from no radio to hi-fi system with a compact disc player. These changes happen quickly and, Mr Pringle believes, some brand loyalty persists when 'near haves' become 'have somes'. That is why Castrol has made the motorcycle market central to its marketing strategy in Vietnam and Thailand. In Thailand, Gastrol concentrated on building distribution and its image among motorcyclists despite government controls restricting profits in the 1970s. Then, when the motorcycle population leapt from 1 million to 5 million in the late 1980s, it was able to hold on to its leading position,

World (overage

Appropriate targeting and positioning of Gastrol lubricants ensures that the company makes profits in markets as different as Vietnam's 'near haves' and the US enthusiasts. By positioning product to fit the market's stage of development, Castrol is profitable in both mature and developing markets. In 1993 the United States and Germany were the two most profitable markets, but India was the third and Thailand the sixth.

Burmah Gastrol: Lubricants Division, 1993

Region Europe

North America Asia

Southern hemisphere

Turnover (Em)

679.4

502.5

242.2

201.3

Operating prufits 95.9 50.7 40.0 15-8

Mr Tim Stevenson, Castrol's chief executive, says that the company has 'proved wrong the sceptics who for years have been arguing that Castrol is a mature business, liable to be snuffed out by the major oil dinosaurs'. He has good reason to boast. Excluding the 1990 Gulf crisis year, Castrol's profits have maintained a 14 per cent compound annual growth rate since 1985. While the world lubricant market has been almost flat over the last ten years, Gastrol has increased its sales by 6 per cent per year on average -some maturity; some snuffing out.1

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Responses

  • trudy
    What strategy castrol used in entering vietnam?
    7 years ago
  • CAMERON
    What are some examples of liquid engineering?
    6 years ago

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