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MODELLING OF AUTMOBILE BUILDING ENTERPRISES' INNOVATIONS
DIFFUSION
Yashkina O.I. PhD, senior lecturer
Odessa National Politechnic University, Odessa, Ukraine
Яшюна O.I. Моделювання дифузп тновацт авто-Mo6ine6ydienux тдприемств.
У статл проан^зовано збут легкових автомобЫв та виявлено фактори шновацшно! дiяльностi виробникiв та дилерiв, яю впливають на нього. За результатами до-слiдження виявлено три види попиту на легковi авто-мобЫ: класичний, новорiчний та осiннiй. Отримано прогнози продажу певних популярних в Украш марок легкових автомобiлiв на 2014 рш.
Ключовi слова: дифузiя шновацш, математичне моделювання, сезоншсть попиту, декомпозицiя часового ряду, автомобiлебудiвнi тдприемства
Яшкина О.И. Моделирование диффузии инноваций автомобилестроительных предприятий.
В статье проанализированы продажи легковых автомобилей и выявлены факторы инновационной деятельности производителей и дилеров, которые влияют на них. По результатам исследования выявлено три вида спроса на легковые автомобили: классический, новогодний и осенний. Получены прогнозы продаж определенных популярных в Украине марок легковых автомобилей на 2014 год.
Ключевые слова: диффузия инноваций, математическое моделирование, сезонность спроса, декомпозиция временного ряда, автомобилестроительные предприятия
Yashkina O.I. Modeling of auto companies innovationsd iffusion.
The paper analyzes passenger cars sales and identifies factors of manufacturers' and dealers'innovation activity that affect them. The study identifies three types of demand for cars: classic, Christmas and autumn. Sales forecasts for certain popular brands of cars Ukraine for 2014 are obtained.
Keywords: diffusion of innovations, mathematical modeling, seasonality of demand, time series decomposition, automakers
Predicting of the market conditions' future trends, with the demand for products, with consumer preferences is an important task and a big challenge for marketing experts. The market usually develops spontaneously and unpredictably. There are factors that can not be predicted. How will they act, what impact ahould we expect from them - this question has no right answer in advance.
But the study of trends that have already formed in the market allows us to construct models. The situation in the domestic automotive market is not optimistic in recent years. The demand for domestic cars does not satisfy neither the manufacturer nor the dealer. Therefore, there are protective mechanisms of Ukrainian manufacturers, as high duties on imported cars and utilization fee. Mathematical tools for domestic cars' demand prediction should provide instruments for sales and promotion control.
Analysis of recent research and publications
In today's publications automotive enterprises' management strategies are more analyzed. Choosing a strategy is based on a policy of protectionism [3], or under the crisis [8], or with the use of modern technology [9]. Current trends in demand for passenger cars in Ukraine, and domestic cars' export potential considered in works of: Kryvokon O.H., Bondarenko A.I. and Omelchenko O.V. [5, 6], but the material is too general and does not apply to specific car brands.
Unsolved aspects of the problem
Current passenger cars market's development trends, changes in consumers' demand and in their preferences bring corrective amendments to the classical theory of product life cycle. It significantly reduces at high market dynamics. This situation requires a detailed study of fluctuations in demand for passenger cars and its impact factors.
The purpose of the article is the to classify the demand for passenger cars basing on innovation policy of the manufacturer. The main material of the research
The most famous domestic automobile manufacturer with complete production cycle is PJSC "Zaporiz'kyj Automobile Building Plant". Zaporiz'kyj Automobile Building Plant produces five models of passenger cars under the brand ZAZ: ZAZVida ZAZ Forza, ZAZ Sens, ZAZ Lanos, ZAZ LanosPick-up.
Let us consider the dynamics of sales of these brands in Ukraine (Fig. 1-3) [1].
As seen in Figures 1-3, the dynamics of Ukrainian cars' sales is unstable. It is characterized by sharp
fluctuations in demand, which are connected with the seasonal component, as well as with the commodity and price innovations of manufacturers and dealers.
Fig. 1. Dynamics of ZAZ Sens and ZAZ Lanos sales, pc.
Fig. 2. Dynamics of ZAZ Forsa sales, pc.
ZAZ Vida
•jsE^' CJ** -f^' -t^5" 0s'
Fig. 3. Dynamics of ZAZ Vida sales, pc.
In 2013 the sales leader (ZAZ Lanos) gave way to his "brother" - ZAZ Sens. From 2006 to 2011, ZAZ Lanos according to the results Of Ukrainian automobile rating "Autorating" held the title of "absolute leader in sales" [7]. It is likely, that "crazy" popularity of ZAZ Sens is because of its appearance in hatchback (February 2012). As well as fact that the company and dealers hold the lowest price for this
brand in the class C (up to 100 thousand UAH) -56900 UAH.
The most popular car models in Ukraine in 2013 were (table 1.):
As can be seen from Table 1, ZAZ Lanos and ZAZ Vida are in the top ten sales leaders. ZAZ Vida started on the market in February 2012 and thanks to its modern design, high technical characteristics and proper promotion over 2 years entered the top ten.
Table 1. Bestsellers in Ukraine in 2013 [according to 1]
Place Name The sales volume, pc
1 ZAZ Sens 6611
2 HyundaiAccent 5611
3 Geely CK 4961
4 GeelyEmgrandEC7 4673
5 Geely MK 4600
6 KIA Rio 5463
7 RenaultLogan 4495
8 VolkswagenPolo 4486
9 ZAZ Vida 4027
10 ZAZ Lanos 3947
ZAZ Forsa entered the Ukrainian market in February 2011, and in February 2012 received the title of "best affordable car for 2011". In 2011, Forsa's sales amounted to 2433 units (19 in the rating), and in 2012 - 3257 units (16 in the rating). But after two years of popularity "wave" the attention of consumers to the Forsa brand rapidly fell. Its sales in 2013 decreased by more than 2 times compared to previous years - 1353 units.
Innovative automotive products have different trends in diffusion. To get more information, to obtain fundamental models of diffusion of innovations in
passenger car market let us consider the sales' dynamics of other car brands.
The demand of Ukrainian car lovers for Geely cars in 2013 increased by 35.8% compared to 2012. It is the only manufacturer of top ten, which reached a significant increase in sales. Chinese cars coming off the assembly line of Kremenchug car assembly plant are aimed to meet the needs of consumers in all vehicle classes - from budget Geely CK (Figure 4) to conditionally luxury GeelyEmgrandEC7 (Fig. 5).
Fig. 4. Dynamics of sales Geely CK, units
800 7 00 600 5 00 400 Geely Emgrand EC7 -A/
200 100 0 —JXsK/sf^ v v ^- -jP4" ^ ^ ^ ^ ^
Fig. 5. Dynamics of GeelyEmgrandEC7 sales, units
Pricing policy of Geely cars' manufacturer and dealers is directed at market capturing. Thus, the manufacturer keeps the price of 55900 UAH on the budget car Geely SC, moreover, Geely prices have not changed even with the introduction of utilization fee. This price policy allows to maintain sales in the growing trend.
GeelyEmgrandEC7 is the crossover with a 1.8 liter engine, costing from 100 thousand UAH. After two and a half years of the model's emergence the trust of Ukrainian people increased, and in December 2013 (the "dead" season) sales reached "historical maximum" - 761 units.
From this example it is possible to get a conclusion about the high price elasticity of demand of domestic consumers for passenger cars. But let me consider a few more examples. In April 2011, the Ukrainian market was struck by a new design of the popular Hyundai sedan. South Korean car got aggressive traits and due to the new exterior increased Accent sales in several times (Fig. 6). The market's attention to distinct Hyundai cars' design does not decrease over two years, and in April 2013 Accent sales reached 948 units.
Fig. 6. Dynamics of HyundaiAccent and Kia Rio sales
The closest Hyundai's competitor is the KIA, which is also South Korean company, in January 2012, it radically changed the design of the popular sedan Rio, it became similar to the "aggressive" Accent. The market immediately reacted to more than double sales (Figure 6). In 2013 these brands had identical sales. So radical design changes result in "jumps" of demand, much higher than thanks to the price discount.
Let us consider a few more examples. A popular in Europe passenger car Ford Fiesta (second highest rating in 2013) is not included in the most popular cars top ten in Ukraine. Its sales in Ukraine are stable and have a small increasing trend (Fig. 7).
The market interest is kept by FordFiesta car developers by design changes and technological improvements. Thus, in 2012 the car's design was improved, and in 2013 the car was equipped with a new 1.0-liter engine with 100 hp. (Ecoboostturbo), as well as with the Auto-Start-Stop system, which together allow to save up to 30% for fuel costs. These changes have led to positive changes in demand, but significant "jumps" were not observed.
The last example: let us consider the dynamics of sales of popular brand in Ukraine - Skoda Fabia (Fig. 8).
600 Ford Fiesta
500 400 300 200 \rJ\a—rd\s
100 0 V/-^^-W-
Fig. 7. Dynamics of FordFiesta sales, units
Fig. 8. Dynamics of SkodaFabia sales, units
Czech car manufacturer Skoda is now a part of German concern Volkswagen. Therefore Ukrainian consumers prefer European car quality. Affordable price for Skoda Fabia cars, their efficiency and technological equipment have made them popular among young people. In 2012, the Fabia has undergone some improvements in design, which led to a slight increase in demand, but later, in 2013,
Skoda Fabia was not improved either in technology or in the design or in bright promotion so sales declined even compared to 2011 year.
According to given examples, we can form the table showing the impact of changes in design, technology and prices on demand. (Table 2)
Table 2. The influence of technological, design and price changes for automotive demand
№ Brand Demand Design improvement Technological improvement Pricing policy Result
1 ZAZ Sens / In 2012 came in hatchback minor improvements one of the lowest prices -from UAH 56900. leader in sales in 2013
2 ZAZ Vida / entered the market in February 2012 with a modern design modern technological weapons 86-106 thousand UAH in two years entered the top ten
3 ZAZ Lanos S minor minor 70-90 thousand UAH rapid fall from the first position in 2006-2011 to the 10th in 2013
4 Geely CK minor minor one of the lowest - from UAH 55900 third place in sales in 2013
Table 2. continuation
5 GeelyEmgrandEC7 / entered the market in July 2011 in a modern style modern technological weapons 100-120 thousand UAH fourth place in the sales rating in 2013
6 Geely MK ß entered the market in March 2012 with the modern design modern technological weapons 76-91 thousand UAH Over less than two years, took fifth place in the top five
7 HyundaiAccent J* radical redesign in 2011 minor improvements 132-181 thousand UAH second place in the rating in 2013
8 KIA Rio radical redesign in 2012 minor improvements 146-171 thousand UAH rapid sales growth in the years 20122013
9 FordFiesta / slight improvement in 2012 significant improvement in 2013 110-160 thousand UAH steady growth in sales
10 SkodaFabia slight improvement in 2012 minor 108-170 thousand UAH decline in sales in 2013
The demand for cars is seasonal. Using the method of "moving average ratio" (decomposition of time series) we can calculate seasonal influence on it. In Table 3 there are seasonal indices that were calculated according to the monthly sales of discussed
earlier car brands. For the calculation we have chosen the brands, over the sale of which there is a data for four years - from 2010 to 2013. For lesser period the calculations are not sufficiently reliable.
Table 3.Seasonal indexes of car sales
KIA Rio SkodaFabia HyundaiAccent ZAZ Lanos ZAZ Sens Geely CK FordFiesta
January 0,81 0,55 0,40 0,61 0,50 0,73 0,85
February 0,71 0,59 0,43 0,61 0,51 0,71 0,48
March 1,44 1,05 0,84 0,84 1,24 1,36 0,88
April 1,54 1,21 1,20 0,88 1,16 1,26 0,83
May 1,02 1,04 1,30 1,06 1,11 0,66 0,73
June 1,05 0,97 1,18 1,10 1,06 0,64 1,13
July 1,09 1,16 1,32 1,06 1,46 1,25 1,07
August 1,17 0,90 1,05 1,18 0,92 0,92 1,08
September 0,82 0,83 1,18 1,13 0,72 1,25 1,54
October 0,87 1,14 1,00 1,10 0,76 1,01 1,38
November 0,70 1,28 0,91 1,11 0,68 0,81 0,97
December 0,64 1,30 0,76 1,03 0,72 1,46 0,88
Seasonality of demand for new cars has a different character. In all cases there is a sharp drop in demand in January and February, then - spring "boom" and then there are very different trends.
We have identified three types of seasonal demand for cars:
— Classical;
— Christmas;
— Autumnal.
Classic demand, in our view, is own by the following car brands: KIA Rio, Hyundai Accent and ZAZ Sens (Fig. 9). The maximum sales in this case occur in the spring months, than there may be also a "summer wave". This schedule of seasonal indexes characterizes the demand for popular cars. Consumers are buying novelties in the sales season, but not during closeouts prices.
KIA Rio Hyundai Accent — — — ZAZ Sens
Fig. 9. Seasonal indexes of classic car demand
Demand that we called "Christmas" present trends in selling such brands of cars like Skoda Fabia and Geely CK (Fig. 10). During Christmas Sale seasonal indices of these models reached 1.3 and 1.46, so the sales in December exceeded the average for the year by 30-46%. Spring demand for these brands is also
high, but does not reach the level of December. This graph, in our opinion, characterizes the demand of maximum price gains. This car attracts consumers by the discount price, not by specification or design.
Fig. 11. Seasonal indexes of maximum "autumnal" demand
"Peak" seasonal indexes in the third group go through late summer - early autumn. For example, the maximum sales of the Ford Fiesta are in September (index 1.54) and in October (index 1.38), and of the Lanos - August (index 1.18) and September (index 1.13). During this period, car dealers are beginning to offer discounts, but not as significant as in the new year period. In our view, such a demand characterizes discerning consumers
who are not in a hurry to purchase car in the spring season, but expect discounts of the season, but not final closeouts.
By dividing the outgoing sales data of car brands in the seasonal indexes from the table 3, and using tabular processor Excel's service "Data Analysis", we got the equation of the linear trends in car sales for all brands considered (Table 4).
Table 4. Linear trends in car sales
Car brand | The equation of the trend | Interpretation
Classical demand
KIA Rio Y = 31,09 + 10,321 Expected sales excluding season - 10 cars per month in average
Hyundai Accent Y = 252,61 -1-9,31t Expected sales excluding season - 9 cars per month in average
3A3 Sens Y = -108,66 -1- 19,69t Expected sales excluding season - 20 cars per month in average
Christmas demand
Skoda Fabia Y = 161,51 -1-2,221 Expected sales excluding season - 2 cars per month in average
Geely CK Y = 142,81 -1-7,371 Expected sales excluding season - 7 cars per month in average
"Autumnl" demand
Ford Fiesta Y = 200,24 -1- 0,81t Expected sales excluding season - 1 car per month in average
Lanos Y = 1078,34 - 14,42t Expected sales excluding season - 14 cars per month in average
The most promising group of cars is classic demand type. Sales growth excluding seasonality is expected from 9 to 20 cars in a month. In the second group - Christmas demand - there are less optimistic forecasts - from 2 to 7 cars per month excluding seasonal. In the third group - the "autumnal" demand - there are the most pessimistic predictions -increasing demand for one car per month, or a decrease of 14 cars.
According to the obtained trends for each model we can construct forecasts for the trend (excluding seasonality), and also multiplying the trend to
seasonal indexes (including seasonality). We built four forecasts (Table 5).
For example, for the popular Hyundai Accent and ZAZ Sens the 2014 forecasts, based on seasonality,are quite optimistic (Fig. 12, 13).
Noticeable difference between the forecasts and initial data on the prehistory interval is due to the sharp "jumps" of demand in early 2011 in the Hyundai Accent model and in early 2012 in the ZAZ Sens model.
In the more stable cases forecasts are usually almost identical to the original data on the prehistory period.
Table 5 Forecasts based on seasonality for certain vehicle models, units
Hyundai Accent ZAZ Sens Geely CK Ford Fiesta
Jan.14 284 428 365 209
Feb.14 309 447 361 118
Mar.14 611 1110 701 218
Apr.14 884 1062 658 206
May 14 970 1038 350 182
Jun.14 891 1012 344 282
Jul.14 1009 1422 680 268
Aug.14 813 914 507 272
Sep.14 924 730 699 389
Oct.14 793 785 572 349
Nov.14 730 716 465 246
Dec.14 617 772 848 224
Fig. 12. Initial data and forecast for Hyundai Accent
Fig. 13. Initial data and forecast for ZAZ Sens
Thus, in the Ford Fiesta we can see more accurate the fluctuation in the direction of reduction (Fig. 14). model, but the rapid decline in sales in 2011 affected
Fig. 14. Initial data and forecast for FordFiesta
The most accurate predictions, in our opinion, were obtained by decomposition of the time series for GeelyCK, showing a steady increase in demand since 2010. In Fig.15 it is noticeable that the forecast for the
prehistory period repeats the output data's fluctuation exactly. Therefore, we can assume that the prediction in this case is also the most accurate of all the above examples.
Fig. 15. Initial data and forecast for GeelyCK
Conclusions
The tendencies can be considered by dealers and manufacturers in car sales and production planning, in the formation of communication and marketing policy, and most importantly, in the development of
strategies for innovation in design and technology. The demand of cars is affected mostly by successful design factor; the low price is on second place. Considering the influence of these factors on demand manufacturer can plan sales volume.
References:
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HaAaTO дo peдкцiï 28.01.2014
Яшкiнa OKcara Iвaнiвнa / Oksana I. Yashkina
nomer27@ukr. net
Посилання на статтю /Reference a Journal Article:
Modeling of auto companies 'innovationsdiffusion [Електронний ресурс] / Yashkina O.I. // Економжа: реалН часу. Науковий журнал. — 2014. — № 1 (11). — С. 147-154. — Режим доступу до журн.: http://economics. opu. uafiles/archive/2014/n1. html
