To what extent has kia’s 2021 rebranding strategy improved its profitability in the automobile manufacturing industry?

Kia Motors is a South Korean multinational corporation that manufactures vehicles with its mission 'to produce the best vehicles exhibiting superior technology, quality, value through a spirit of continuous improvement' (Kia, 2023. - SD 1). Kia's workforce consists of over 52,000 employees (Kia, 2023 - SD 1) and owns a 3.02% global market share in the vehicle industry (Statistia, 2022).

However, Kia's decision to prioritize being cost-efficient created trade-offs with the quality of their products. It has garnered lots of negative customer reviews online, receiving a rating of 1.4 stars on the consumer review platform Trustpilot (Trustpilot, n.d.), and developed a poor brand reputation for being cheap and unreliable. The key concept of change is identified as Kia changed its brand image in 2021 by making its brand appear more modern in hopes of moving towards the electric vehicle industry. Change refers to the modification or transformation in business operations in response to internal or external influences. It is important to maintain a positive brand image and customer satisfaction by adapting to changes in the market's demands to remain competitive, especially in the lucrative automobile industry, valued at over 2.9 trillion USD in 2022 (Statista, 2023). Therefore, it's important to investigate the research question: To what extent has Kia's 2021 rebranding strategy improved its profitability in the automobile manufacturing industry?

To investigate this research question, reputable secondary resources will be used. I'll specifically use well-trusted news articles, such as Kia's rebrand has left many people wondering who 'KN' is by The Verge, to collect relevant qualitative information. Alternatively, quantitative information will primarily be derived from Kia's website and financial data to evaluate how its profitability has shifted over the past years. Kia's financial accounts will be reliable because it is a public company that requires them to be transparent with their financial performance. These sources come from various stakeholder perspectives and enable me to provide a better insight into Kia's performance after adopting its rebranding strategies.

The product life cycle is a framework that examines the survivability of a good or service (Hoang, 2022). It is separated into five distinct phases: Development, Introduction, Growth, Maturity, and Decline (Hoang, 2022). This concept is used to analyze the stage a business fits into and make business decisions depending on what stage in the product life cycle a company is in (Hoang, 2022).

In 2021, Kia reached the maturity stage of the product life cycle [Figure 1] as they became one of the market leaders in the automobile industry, but maintained a relatively low year-on-year sales growth rate (Kia, 2023 - SD 2). Since Kia's sales began to stagnate in 2021 (Kia, 2023 - SD 2), one of Kia's main objectives is to differentiate itself to prevent it from entering the decline stage of the Product Life Cycle. Thus, Kia's rebranding aimed to serve as an extension strategy to modernize itself and build a larger customer base in hopes of increasing sales and profits.

Kia primarily focused on producing conventional automobile products, including sedans and minivans. As a part of Kia's rebranding strategy in 2021, Kia aimed to position itself as a futuristic brand in the automobile industry. Kia focuses on expanding its products towards 'sustainable mobility' by producing electric vehicles (EVs) and purpose-built vehicles (PBVs) to achieve this, hoping to offer 11 EVs and a 6.6% global EV market share by 2025 (Kia, 2023 - SD 1). This extension strategy also enhances its unique selling point of having a competitive pricing strategy by offering more technologically advanced and innovative vehicles at affordable prices. Since Kia is expanding into new markets by diversifying its product portfolio, this increases its profitability as potential customers from the EV market segment would be interested in purchasing Kia's products in the long run alongside its current customer base.

Kia also uses a below-the-line promotion to promote its "Plan S" rebranding strategy by changing its intangible assets, including its logo, slogan, and website. Kia hosted a launch event featuring lit-up drones in the sky that showcased their new logo design to introduce the world to their rebranding strategy (Brand Master Academy, 2022 - SD 3). Kia also incorporated an above-the-line promotional strategy through advertisements on billboards and televisions (MBA Skool, n.d.).

These promotional strategies align with Kia's new product direction and rebrand to be an innovator in the automobile industry. However, there are negative implications associated with Kia's decision to position itself as a higher-quality brand in the EV market. It may be considered an oversaturated and highly competitive market with much larger companies, such as Tesla, already market leaders in the industry. Hence, Kia's extension strategy to reinvest a large portion of their capital may hinder their profitability as their new target market of EV consumers may have already developed consumer loyalty to pre-existing brands. Moreover, there is an opportunity cost for Kia to spend lots of their resources on their "Plan S" rebranding strategy because Kia could've spent it through alternative marketing strategies, which may have been more effective in increasing its profitability.

A force field analysis is a model that assesses the benefits and drawbacks of change (Hoang, 2022). I'll use it to evaluate Kia's rebranding effects by rating each force on a scale of 1-5, 1 being the lowest and 5 being the highest, depending on how much each factor will affect Kia's profitability. The weights assigned to each force are justified by looking at the research within my supporting documents.

After weighing each driving and restraining force regarding Kia's decision to focus on innovation and producing EVs, the driving forces were scaled to 14, as the restraining forces were 12. This supports Kia's decision to change its positioning in automobile marketing as Kia's 29 trillion won investment and goal of offering 11 EVs that amass 500,000 sales by 2025 would have long-term benefits on their profitability (Kia, 2023 - SD 1). Although lithium prices skyrocketed (Dreibelbis, 2022 - SD 4), Kia's decision to change its focus meets the market demands as more people are switching to EVs (Dreibelbis, 2022 - SD 4). Since new market demands are being satisfied, this indicates that this is a feasible extension strategy to prolong Kia's market growth.

According to [Figure 3], the restraining forces outweigh the driving forces, indicating that Kia's logo change isn't effective in improving its profitability. Although Kia's logo change follows its new brand identity of being futuristic and follows its competitors' designs in the technology sector by adapting a modern and black typeface (Brand Master Academy, 2022 - SD 3), many people misinterpreted Kia's new logo. Kia's rebranding led to confusion among the general public, with audiences viewing their new logo as "KN" rather than Kia for one and a half years (Clark, 2022 - SD 5). Many people assumed KN was the launch of a new car company, leading to over 30,000 monthly web searches for "KN car" (Clark, 2022 - SD 5). This suggests that Kia's change in branding was not promoted properly and its new logo is ineffective in developing its brand identity and customer awareness (Clark, 2022 - SD 5). Thus, this creates negative implications for Kia's existing customer base and conflicts with Kia's objective of increasing its market growth and profitability.

Kia's sales revenue (Kia, 2023-SD 2) is used to calculate its Gross Profit Margin (GPM) and Profit Margin (PM).

GPM measures the revenue remaining after accounting for costs associated with making and selling a good or service (Hoang, 2022).

With reference to Table 2, Kia's gross profit and GPM have been increasing over the past four years of operations. It is further shown that Kia experienced a significantly higher Y-O-Y growth in gross profit in the years 2021 and 2022, achieving 29.95% and 39.44%, respectively, compared to 2020 with a 6.05% Y-O-Y growth rate (Kia, 2023-SD 2). Moreover, Kia's GPM was substantially higher in 2021 and 2022, with 18.50% and 20.82%, respectively, compared to a GPM of 16.13% and 16.81% in 2019 and 2020 (Kia, 2023 - SD 2). This corresponds to when Kia implemented its "Plan S" rebranding strategy in January 2021 (Kia, 2023 - SD 1), indicating that it was an effective extension strategy to improve its profitability. However, since gross profit only accounted for the cost of goods sold, it is an inaccurate depiction of Kia's profitability.

The profit margin measures Kia's financial performance by finding the ratio between the net income and sales revenue. Since profit margin accounts for operating and overhead costs, they are more accurate than the GPM in determining Kia's profitability.

According to Table 3, Kia's profit margin is 3.14%, 2.54%, 6.81%, and 6.25% in the fiscal years 2019, 2020, 2021, and 2022, respectively (Kia, 2023 - SD 2). The significant increase between 2020 and 2021 could be attributed to Kia's change in branding. Since the trends in these figures are consistent with the GPM in Table 2, specifically a significant increase between the years 2020 and 2021, this implies that Kia's "Plan S" rebranding strategy was effective in achieving higher profits. Furthermore, Kia's profit has substantially increased after 2020, with Kia's profit experiencing 216.70% and 13.63% Y-O-Y growth in 2021 and 2022, respectively (Kia, 2023 - SD 2). Although 2020's decline in profits and 2021's increase in profits are likely due to external factors such as the COVID-19 economic recession, Kia was still able to sustain its profit growth in 2022. These statistics reinforce that Kia's product portfolio expansion and change in positioning in the automobile industry attracted new customers from the EV market segment and satisfied new customer demands. Hence, this suggests that Kia's change in branding is effective in improving Kia's profit margins and profitability potential in the long run.

The Product Life Cycle evaluated how Kia used their "Plan S" rebranding strategy and change in product portfolio as an extension strategy to prolong its market growth. The Force Field Analysis illustrates that Kia's decision to change its positioning in the industry by focusing on innovation and creating EVs helps it remain competitive in the automobile market by adapting to changes in consumer demand. However, it also assesses the limitations of Kia's emphasis on innovation and rebranding itself to appear futuristic. Lastly, the Financial Analysis seeks to help find correlations between quantitative and qualitative data to determine if Kia's profitability ratios increased in the same time period when they implemented their "Plan S" rebranding strategy in 2021.

Overall, Kia's "Plan S" rebranding strategy has improved its profitability in the automotive industry. Kia's change in branding strategies aligns with its mission statement, and its decision to constantly innovate and modernize itself through tangible and intangible assets helps Kia reposition itself in the automobile industry. As such, Kia is able to remain competitive in the automobile industry in the long run, thus increasing its profitability.

However, Kia needs to strengthen its brand identity to increase its profits amid its change in branding since many people are unaware of Kia's rebrand. Kia could achieve this by reinvesting more retained profits towards marketing expenses to promote its brand to larger audiences. Moreover, although Kia's revenue and profitability streams have increased substantially over the past years, we cannot determine how much is due to their rebranding efforts, especially since external factors, such as COVID-19, influenced consumer expenditure within the past years.

Business Results. (n.d.). Kia. Retrieved September 4, 2023, from https://worldwide.kia.com/int/company/ir/archive/business-results

Clark, M. (2022, November 23). Kia's rebrand has left many people wondering who 'KN' is. The Verge. Retrieved September 4, 2023, from https://www.theverge.com/2022/11/22/23473452/kia-rebrand-kn-car-google-searches

Dreibelbis, E. (2022, September 26). [Profit vs. the Planet: Here's Why US Automakers Are All-In on Electric Vehicles]. PC Magazine. Retrieved September 4, 2023, from https://www.pcmag.com/news/profit-vs-the-planet-heres-why-us-automakers-are-all-in-on-electric-vehicles

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