Top Banner
Analysis of Jaguar Case Determination of the Strategic Position
28

Analysis of Jaguar Case Determination of the Strategic Position.

Mar 31, 2015

Download

Documents

Jan Durow
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Analysis of Jaguar Case Determination of the Strategic Position.

Analysis of Jaguar Case

Determination of the Strategic Position

Page 2: Analysis of Jaguar Case Determination of the Strategic Position.

Question:

• Perform a strategic analysis for Jaguar in the context of the international market for luxury cars

• Recommend a suitable strategy(ies) for Jaguar

Page 3: Analysis of Jaguar Case Determination of the Strategic Position.

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)

Page 4: Analysis of Jaguar Case Determination of the Strategic Position.

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 Planning Strategic Planning • A Basic Planning ModelA Basic Planning Model

Page 5: Analysis of Jaguar Case Determination of the Strategic Position.

External Environmental Analysis - PEST

• Government’s golden share (designed to prevent takeover) to end 1990

• British industry highly unionized; many different unions

Page 6: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 7: Analysis of Jaguar Case Determination of the Strategic Position.

External Environmental Analysis - PEST

• Move towards environmentally friendly cars

• “Conscience factor” - not to be seen to be flaunting wealth

Page 8: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 9: Analysis of Jaguar Case Determination of the Strategic Position.

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?

Page 10: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 11: Analysis of Jaguar Case Determination of the Strategic Position.

Porter: The Five Forces Model

Risk of entry by potential competitors

Risk of entry by potential competitors

RivalryAmong

Established Firms

RivalryAmong

Established Firms

Threat of substitute

products

Threat of substitute

products

Bargainingpower ofsuppliers

Bargainingpower ofsuppliers

Bargaining power ofbuyers

Bargaining power ofbuyers

Page 12: Analysis of Jaguar Case Determination of the Strategic Position.

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)

Page 13: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 14: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 15: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 16: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 17: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 18: Analysis of Jaguar Case Determination of the Strategic Position.

SWOT (Contd)

• Opportunities:

• Economic growth

• Japanese market opening up

• New technology readily available

• US$ exchange rate vis-à-vis DM

Page 19: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 20: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 21: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 22: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 23: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 24: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 25: Analysis of Jaguar Case Determination of the Strategic Position.

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)

Page 26: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 27: Analysis of Jaguar Case Determination of the Strategic Position.

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

Page 28: Analysis of Jaguar Case Determination of the Strategic Position.

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