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Jaguar ppoint

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Analysis of Jaguar Case

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Jaguar ppoint

  1. 1. Analysis of Jaguar Case Determination of the Strategic Position
  2. 2. Question: • Perform a strategic analysis for Jaguar in the context of the international market for luxury cars • Recommend a suitable strategy(ies) for Jaguar
  3. 3. How to approach this? • Read case thoroughly • Use strategic planning framework to analyze case • Next: to write out the case: can again use strategic planning framework to document your analysis and suggested strategy(ies)
  4. 4. Basic Planning Process Missions and GoalsMissions and Goals External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats Internal Analysis - Strengths and WeaknessesInternal Analysis - Strengths and Weaknesses Selection of Appropriate StrategiesSelection of Appropriate Strategies Implementation of StrategiesImplementation of Strategies Strategic PlanningStrategic Planning • A Basic Planning ModelA Basic Planning Model
  5. 5. External Environmental Analysis - PEST • Government’s golden share (designed to prevent takeover) to end 1990 • British industry highly unionized; many different unions
  6. 6. External Environmental Analysis - PEST • Economic developments have led to major upturn in demand for luxury cars • Oil prices/interest rates low; standard of living improvements; low cost of capital • Exchange rate fluctuations • Car manufacturing capital intensive
  7. 7. External Environmental Analysis - PEST • Move towards environmentally friendly cars • “Conscience factor” - not to be seen to be flaunting wealth
  8. 8. External Environmental Analysis - PEST • Car manufacturers with broader ranges exploiting technical/engineering merits • New technologies not solely the domain of original innovators - available to competitors • Technological diversification (i.e., aerospace industry) produced spinoffs for car industry
  9. 9. External Environmental Analysis - PEST (Others) • Legal: • Legislation move in US - remove tax deductible status for cars > $21,000 • Japan opening up • New emmision standards in Europe • Suppliers: • Improvement of Jaguar’s suppliers’ quality • Joint venture with GKN Sankey to produce body pressings instead of buying from Rover - Backward integration?
  10. 10. External Environmental Analysis - PEST (Others) • Customers: • Customers of luxury cars mostly wealthy - want to make fashion statement • Customers expect quality, service & excellence • Competitors: • Mercedes, Porsche & BMW main competitors in luxury sector (Cadillac & Lincoln in US) • Acquisitions taking place
  11. 11. Porter: The Five Forces Model Risk of entry by potential competitors Risk of entry by potential competitors Rivalry Among Established Firms Rivalry Among Established Firms Threat of substitute products Threat of substitute products Bargaining power of suppliers Bargaining power of suppliers Bargaining power of buyers Bargaining power of buyers
  12. 12. Porter’s 5 Force Analysis (Structural Analysis) • Potential entrants: Japanese • Barriers: Economies of Scale: Large investment reqd; existing players enjoying large economies of scale; also high exit barriers due to high investment • Product differentiation: customers look for certain attributes in luxury cars • Capital requirements: Car makers require large investments; however, interest rates low • Access to distribution channels: Difficulty by Jaguar in Germany, secured Saibu in Japan, upgrading of distribution channels (divorce themselves from BL)
  13. 13. Porter’s 5 Force Analysis (Contd) • Threat of Substitutes • Other forms of transport • Volume car manufacturers (what is a luxury car?) • “Fashion statement through other means - Condo, etc
  14. 14. Porter’s 5 Force Analysis (Contd) • Power of Buyers & Sellers: • Buyers demanding excellence, quality & service • Appears to be no forward/backward integration (except parts). However horizontal integration through acquisitions •
  15. 15. Porter’s 5 Force Analysis (Contd) • Competitive Rivalry: • Appears low in the luxury cars? Mercedes & BMW in Europe; Lincoln & Cadillac in US • Different cars appeal to different people
  16. 16. SWOT Analysis • Strengths: • Quality/culture identity • History of culture (Pre-BL Years) • Image of luxury • Re-entry into international car races • Upgraded distribution channels • Arrangement with SEIBU
  17. 17. SWOT (Contd) • Weaknesses: • Small car range • Engineering/R&D disadvantage • UNION problems • Dealership network in Germany • Jaguar unable to radically alter design • No economies of scale
  18. 18. SWOT (Contd) • Opportunities: • Economic growth • Japanese market opening up • New technology readily available • US$ exchange rate vis-à-vis DM •
  19. 19. SWOT (Contd) • Threats: • Competition from Mercedes, Porsche & BMW • Japanese may try to enter market • Substitutes - what is a luxury car? • US$ exchange rate fluctuations • US legislation • Government’s golden share • Environmental pressures
  20. 20. Strategic Planning - Written Presentation • Having done an external and internal environmental analysis, how do you proceed? • How do you present your arguments? • There are many ways: you can use the strategic planning format as a framework for your written arguments • SWOT, PEST, Porter’s Analysis go into Appendices • One such way of documentation presented in the next few slides
  21. 21. Sum up External Environment • Late 1980s a period of economic recovery with increase in demand for luxury vehicles, oil prices down and interest rates low • More specifically, competition for Jaguar from Mercedes, BMW and Porsche in Europe (especially from Germany), and from Cadillac and Lincoln in the US • Fewer players in luxury market - less intensive competitive rivalry (Jaguar not in good position vis-à-vis competitors, Japan to enter market). • Adverse currency movements (Jaguar’s hedging in the right direction) and Government’s Golden share due; US regulations. • Threat from volume manufacturers who appeared to be able to match luxury cars on product attributes
  22. 22. Sum Up Strengths • Jaguar successfully recreated quality culture • Jaguar taken on market orientation - customers paramount • Egan’s heart and minds approach - increased productivity • Jaguar upgraded distribution channels in various countries • Features in Jaguar cars not found in German makes - image of luxury • Boosted image: entered LeMans
  23. 23. Sum Up Weaknesses • Distribution channel in Germany • Smaller range of vehicles compared to competitors • Could not radically alter vehicle design as this would damage luxury reputation (fuel efficient, more aerodynamic, green cars) • UNION problems with 11 unions - hence affects productivity
  24. 24. Jaguar’s Present Strategy • Want to Grow • Reduce dependence on US market - though most profitable, adverse currency movements and legislation seen as threats • Want to increase in Germany and enter Japan • Improve quality and dealer networks • Increase range of cars produced • Diversification (consultancy) and want to spend more on R & D
  25. 25. Proposed Strategy (Need for some rationalization and streamlining) • Generic strategy: differentiation (cost leadership is difficult as Jaguar does not have economies of scale and manpower productivity). Emphasize luxury and ample design. Emphasize participation in races. • Within differentiation, focus on wealthy buyers (Mercedes emphasizes on Engineering and attracts upcoming rich; BMW attracts yuppies - compete with S class & 7 Series rather than all)
  26. 26. Proposed Strategy (contd) • Strategic Direction: market development and consolidation rather than product development (keep the small range; don’t go into consultancy, R&D). • Market development: China, HK, Taiwan & Singapore, oil rich SEA countries and ME • Consolidate in US and UK • However, Jaguar needs to continue to lower costs, improve quality and productivity (to support main strategies, and to forestall takeover after Government’s golden share
  27. 27. Some Ratios • Jaguar appears to generate enough profits to fund market development; Profits before tax increased 685% from 1980-1987 • However, current and acid test ratios low (1.75 & 1.02) • Low debt to equity ratio (25% in 1987) • Jaguar in a good position to attract loans for market development
  28. 28. So what happened to Jaguar? • When Government’s Golden Share expired... in 1989, Ford acquired Jaguar. Chairman resigned. • In 1992, the XJ220 tested the exotic car market in Europe but never made it to the U.S…exchange rate fluctuations proving difficult. But in mid-late 90s, Jaguar more successful in US. • Retro look…a little bit of the same thing. No change in the basic shape. Emphasize luxury, wealth niche. Small range maintained. Participation in races continued. • Despite the economic decline in 1990, the company established record sales in Germany, Italy and Japan during the year. • Towards the end of 1990, a new hourly paid working agreement was reached…new arrangements with labour developed. • During 1993 Jaguars went on sale in Russia and many of the new Eastern Block countries. In October...China, a country with tremendous opportunity for economic growth. • Jaguar appeared to continue R&D expenditure

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