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2. DREH¨ON MOTORS PLC 1
Executive Summary
The goal of Dreh¨on Motos Plc is to become the market leader in European car market.
This loss-making company in past, is now on track for profits. From FY’15-FY’18, it
has gathered enough momentum to be a long term profitable firm. At this stage, the
management carried out a complete strategic review of this company and has identified
key areas for improvement. Some of the key conclusion of the strategic review exercise
are as follows.
Strategic Review Conclusions
From the analysis presented in the report we can draw following conclusion :
• The Ambition 2018 objectives has been successful in achieving the company’s return
to growth.
• The company commands leadership in Luxury car market, with the market share
of 3.6%.
• Dreh¨on has strong profit performance, ROE, ROCE and low gearing.
• A low asset turnover indicates inherent inefficiencies in the operation.
• A misalignment of the R&D expenditure with the strategic objectives is observed.
• Promotion budget for the product and company promotion is significantly lower
than the competition.
• Workforce productivity is decreasing year-on-year and its lower than market average.
• Overall workforces’ loss of productivity due to strike and absenteeism, is minimised
because of job security, above market average pay and substantial investment in
training and development.
Recommendations
In order to fine-tune the existing strategy and make required course correction following
are the recommendation for the management for the future.
• Identify the root-cause of the low workforce productivity and take corrective mea-
sures in terms of more training investment or stretching the production targets.
• Increase the promotion budgets for the company to a level, at least above the in-
dustry average, which will help in boosting the demand and in turn the revenue.
• Dreh¨on has achieved least possible gearing at this stage, therefore this is an oppor-
tune time to have a credit assessment by a credit rating agency, to minimise future
cost of investment.
• Allocate substantial portion of retained profits for R&D budget and efficiently utilise
the R&D budget for remaining competitive in the future.
• Hunt for further avenues in the car market to expand the the business.

3. DREH¨ON MOTORS PLC 2
Strategic Review
Our Mission
“Our Mission is to produce environment friendly, world-class and reliable vehicles.”
The company’s strategy for past the four years, at Dreh¨on, has been about making it
a market leader, economically and environmentally. Back in 2014, in our Ambition 2018,
we specified four key objectives to make Dreh¨on the most successful and delightful car
manufacture in the Europe by 2018.
Ambition 2018
• To command above average share of target European car market.
• Provide shareholders sustainable return on capital employed (ROCE) of above the
market average of 18%.
• Dreh¨on aims to become the most attractive employer in the industry by 2018. To
produce world-class vehicles it needs highly qualified, result driven and highly mo-
tivated people.
• Introduce innovative products and become a leader in customer satisfaction and
quality.
The company made a phenomenal progress with this strategy in the past years, de-
spite the significant challenging macro and micro economic climate in Europe. In 2018,
with a £4.61 Billion in net revenue and operating profit of £748.5 Million,it has not only
met the Ambition 2018 targets but, also exceeded them. Following the change-over from
EMG Plc, Dreh¨on has dramatically consolidated the business by cost transformation that
reduced the financial risk to a minimum possible level, and also consistently provided
more than 30% of return on equity (ROE) and return on capital employed (ROCE) every
year, which strongly indicates a sustainable long-term growth.
A company’s success can not only be measured by the sales and financial indicators.
Therefore, Dreh¨on has also two key non-financial goals pertaining to human resources
and innovation in Ambition 2018. By following this strategy of holistic growth Dreh¨on

4. DREH¨ON MOTORS PLC 3
has also attracted a qualified and motivated workforce. During the past four years the
average number of days of productivity loss due to the industrial actions was as low as 2.6
days, one of the lowest in the market. Moreover, by extending the product portfolio from
2 models to 5 successful models, ranging form City to Luxury segment, the company has
become the market leader in luxury car segment by capturing the biggest share,i.e. 3.6%
of the European car market.
Still, there are many challenges in front of Dreh¨on that need to be addressed in order to
maximise its efficiency and effectiveness. The primary being the decreasing effectiveness
in utilization of the assets, as indicated by the year-on-year decreasing assets turnover
ratio. This under utilization of assets can be the underlying cause of the smaller year-
on-year growth, in FY’16-FY’17, of 4%. The productivity of the workforce also shows a
general negative trend, thus it could be an additional plausible factor in the slow grow of
the sales revenue.
Vis-`a-vis the competition in FY 2018, Dreh¨on’s performance has been a mixed bag.
Performance Dreh¨on Market Avg. Remark
Profit (£Mil.) 603.45 433.76 Above average
EPS (£) 120.69 86.54 Above average
ROE (%) 30.02 35.2 Below average
Sales (£Mil. ) 4618.22 4970.12 Below average
Productivity (Cars/Worker/Year) 38.99 56.79 Below average
Sales/ Employee (£000’s) 13386.15 1542.77 Below average
Overall, Dreh¨on has above average profits but, there are challenges to overcome in the
areas of growth in sales and productivity of the workforce, to become undisputed market
leader.
Marketing Review
In terms of marketing strategy of Dreh¨on is in alignment with the goals of the Ambition
2018. Post 2014, the company is re-branded as Dreh¨on, which is fusion to two German
words for power and beauty, in order to keep historical ties with the European population.
Thus the brand creates the perception of style and power. Even though, there is conno-
tation of power with being gas-guzzler and polluting cars, Dreh¨on belies this commonly
held notion. It is continuously improving its low-emission and fuel-efficient engines for

5. DREH¨ON MOTORS PLC 4
the cars, by spending about 5%-10% of its retained profit on the R&D. Which is also in
fact the mission of the company. With this strategy to boost innovation and encourage
new development, the company has now become a leader in the luxury segment of the car
market.
FY’14 FY’15 FY’16 FY’17 FY’18
Tot. Market Share (%) 1.30 1.02 1.04 1.14 1.37
City (%) 0.21 0.62
Medium (%) 1.86 1.43 1.39 1.46 1.56
Large ( %) 2.72 2.11 2.02 1.89 1.86
Luxury (%) 0.88 2.13 2.65 3.47
The promotional spending of the company is increasing yearly but as of FY’18 the
company sends on an average of 374.7 Million where as Dreh¨on spending 212 Million.
Furthermore, the investment in the R&D is as low as 5.3% of the retained profit which is
at a critical level.
Human Resources Review
Human Resource strategy of Dreh¨on reflects its overall strategy. Dreh¨on identified the
factory workers are the bottleneck function in the industry. Therefore, right from FY’15
it kept the remuneration above average market levels and reduced the redundancies to
zero. Not only that it paid them one of the highest salaries, of £474 per week in FY’18
where the market average was £461, which kept the workforce motivated and productive.
As a consequence all these measures, the unproductive days due to strike and absenteeism
are on an average 2.6 days over past 4 years, where as in FY’18 the maximum productive
days lost elsewhere in the industry were 29.
Furthermore, the workforce positively responds to the investment in training and
development towards reduction of the warranty costs in the preceding year.
Financial Review
The financial strategy for Dreh¨oh has “Cost Transformation” at its foundation, which
helps in aligning the costs with the strategic objectives, as listed by Ambition 2018.
Furthermore, the company has primarily relies on the internal sources of finances such as

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working capital and retained profits. Therefore, it could keep cost of finances low and as
a direct consequence reduction in the gearing for creating favourable conditions for future
inward investments.
Future Options and Decision Criteria
At this juncture Dreh¨on Motors Plc is poised for further growth in 2019 but to become
the absolute market leader, it needs to choose from following strategic to compete in the
market.
1. Pursue with the current strategy without any changes.
2. Fine tune the current strategy with realignment of .
3. Adopt a completely different strategy such as focusing on only the most profitable
products etc.
For choosing the future strategic move, a criteria such as the following can be applied for
the decision making process.
1. Provide Return on investment above market average.
2. Provide long term sustainable growth.
3. The choice should have least cost implications for Dreh¨on in near future.

7. DREH¨ON MOTORS PLC 6
Options Evaluation
By applying the above stated criteria, the first option i.e., pursue the current strategy has
least cost implication. Moreover, it can provide an above market average returns in the
near term but, because of the inefficiencies in the assets utilisation, low investments in
innovation and R&D and unoptimised levels of workforce productivity it fails to ensure
the long-term sustainable growth.
The second option, i.e., to fine tune the current strategy in the areas where fails such as
increasing investments in R&D, further training and development, promoting the prod-
ucts aggressively against competition etc., has a few bigger cost implications than the
former option. However, as this strategy is partially tried and tested it has high potential
to satisfy all the above listed criteria.
The last option, which involves complete overhaul of the existing strategy, may not be
able to satisfy the least cost implication criteria. Also, the time and other resources that
would it require to implement many not be justified.
Therefore, with all due considerations, the second option is the most suitable choice
for the future course of Dreh¨on.
Recommendations
In order to do the fine-tuning and the required course correction, following are the rec-
ommendation for the future course of action.
Short-term Measures
• Identify the root-cause of the low workforce productivity and take corrective mea-
sures in terms of more training investment or stretch the production targets.
• Increase the promotion budgets for the company to a level, at least above the in-
dustry average, which will help in boosting the demand and in turn the revenue.
• Dreh¨on has achieved least possible gearing at this stage, therefore this is an oppor-
tune time to have a credit assessment by a credit rating agency to minimise future
cost of finance.
Long-term Measures
• Allocate substantial portion of retained profits for R&D budget and efficiently utilise
the R&D budget for remaining competitive in the future.
• Hunt for further avenues in the car market to expand the the business.

8. DREH¨ON MOTORS PLC
Annual General Meeting
31, January 2019
Company Confidential DREH¨ON MOTORS PLC 31 January 2019 1 / 5

9. Progress in 2018
Major Achivement
Achieved the Ambition 2018 strategic objectives.
10.2% orgnaic revenue growth with CAGR of 10% form 2014.
13.5% growth in EPS, up by CAGR of 13.52% from 2014 level.
Strong Growth in on 3C’s
Cash Balance £1.64 Billion
Cost Controls through “Cost Transformation”
Reurn on Capital Employed 30.2%
Luxury Car Market leader with 3.6% market share
Company Confidential DREH¨ON MOTORS PLC 31 January 2019 2 / 5

10. Key Conclusions from the Strategic Review
Positive
The strategy achieved the company’s return to growth.
Dreh¨on dominates luxury car market with 3.6% share.
Dreh¨on has strong profit performance, ROE, ROCE and low
gearing.
Overall workforce loss of productivity minimised because of job
security, above market average pay and substantial investment in
training and development.
Company Confidential DREH¨ON MOTORS PLC 31 January 2019 3 / 5

11. Key Conclusions from the Strategic Review
Negative
A low asset turnover indicates inefficiencies in operations.
R&D expenditure misaligned with the strategic objectives.
Promotion budget is significantly lower than the competition.
Workforce productivity is decreasing year-on-year and its lower
than market average.
Company Confidential DREH¨ON MOTORS PLC 31 January 2019 4 / 5

12. ROCE Growth On Track for Target of 30%
Recommendation
Maximise Assets Utilisation
Drive revenue growth by
production
Boost innovation and R&D
Productiviy Improvements
Investing in Training
Increse Promotion
Horizontal Expansion
Company Confidential DREH¨ON MOTORS PLC 31 January 2019 5 / 5