Strategic Management at Aston Martin - Case Study Example

Aston Martin – strategy analysis An overview of the company: Aston Martin Lagonda Ltd. is well known for its luxury and sports cars. It is a famous British car manufacturing company with a brand name that shows unique features. The company is based in Gaydon in Warwickshire of the United Kingdom. The brand name of Aston Martin is strongly associated with the name of James Bond. It is known as the James Bond’s car as the creator of Bond Mr. Ian Fleming accessorized his hero in his book as well as in the movies with Aston Martin cars. The company was established in the year of 1913. Lionel Martin and Robert Bamford were the founders of this company. It was established to fulfill a long cherished dream of the two founders. They wanted to produce a very unique sport car. According them, a sport car should essentially have some individual characteristics. But at that time the sports cars in the U.K market lacked individuality. They thought a sport car should always meet the highest standards and those who would buy it should be exhilarating to drive this unique car as well as to own such a car. To give sports cars unique and distinctive features, they set up Aston Martin. Over the years, many things have changed in the company including its ownership, but at every point of time the company has always stuck to its motive of delivering cars with high quality and unique features that fully satisfy its brand values. The goals that were set up by its founders at the very beginning are still found to be very relevant and the present owners are putting all their efforts to fulfill these goals. An Aston Martin Stands for beauty, soul as well as power. In the luxury and sports cars market, an Aston Martin has always held a special position, and the company believes that it will be able to hold this special position in future also (Aston Martin Today, 2009). Evolution in the ownership, management, strategy making, product portfolio and performance through the passage of time: If one looks into the history of the company, the thing which catches the eyes most is the fact that the ownership of the company has kept on changing at regular intervals. The first car had rolled out with the brand name of Aston Martin in 1915. But the outbreak of the First Word War stopped further production. After the end of the war, the company again got a new boost as its founders planned to make cars for the French Grand Pix. Around 55 cars were rolled out of the factory on 1922 and competed in the race. At their very first appearance the Aston Martin cars caught the eyes of the viewers on the racing field by setting world speed as well as records for endurance. But the company had become bankrupt in 1924 and had to be closed with Martin leaving the company. But the company again revived at the end of 1926 with the investments of a number of rich businessmen of the country. Augustus Bertelli took over the charge of the technical director and remained in that position up to 1937. The Aston Martin cars that rolled out from the company at that tome were known as the Bertelli Cars. Most of these cars were built with such techniques that they can set records in the race tracks. However, in 1936 the company had decided to shift its focus from racing cars to road cars. Bur before the Second World War car production had been at very low levels. After the end of the Second World War the ownership of the company went to the hands of David Brown Limited in 1947. Mr. Brown actually appeared as the saviour of the firm. He also purchased Lagonda at the same year. The company started to produce classic series of “DB” cars since 1955 under the ownership of Brown. All these ‘DB’ series cars established a high brand value for the company and on the racing field also they set good records. Among all these cars, DB4 established the reputation of the company on a firm ground. In spite of achieving substantial success, the ownership of Brown did not go for long. In the very initial years of 1970s the company had suffered from various financial problems and in 1975, American businessmen Peter Spargue and George Minden came to rescue the firm by acquiring it and giving it required financial strength. These two businessmen undertook huge efforts to establish the company on the path of modernization realizing the emerging needs of that time. Several high-tech cars with distinctive features rolled out of the factory of Aston Martin at that time including the V8 Vantage in 1977, the Volante having the unique feature of being convertible in 1978, and the one-off Bulldog in 1980. At that time, the technical head of the firm Town also styled Lagonda which had futuristic features. (Lehbrink and Schlegelmilch, 2005; Wood, 2000) In spite of producing such eye catching, high performance models, the sale of Aston Martin had not been very impressive and in 1980s it again faced financial problems with drop in its sale. At the beginning of 1981, Gauntlett and CH industries took over the firm with 50-50 shareholdings. Under their ownership the firm built the world fastest four-seater car and adopted the strategies of building a sales team to increase sales volume and making huge publicity of the cars. These business strategies tasted enormous success with their new product Aston Martin Lagonda and their market expanded to Persian Gulf states, Qatar, Kuwait, and Oman. But this success could not last for long as the conditions for trade in the petroleum markets no longer remained favorable. In 1986, to augment sales volume the company took the help of James Bond, as the then Managing director Gauntlett decided to combine the name of James Bond and Aston Martin once again. It was a part of publicity stunt. This strategy appeared to be successful, but there also arose need of additional funds to ensure the company’s survival in long run. Realizing the need of fund, a portion of the company was sold to Ford in 1987. In 1987, retired V8 and realizing the need for introducing new models, manufactured the Virange range. In 1991, Ford took over the full control over the company as the new models would require engineering inputs by large amount. In the Ford era the company had been able to augment its brand value and had become a member of premier automotive group. In 1995, for the first time in history the company produced 700 cars in one year. It also made a come back on the race track on 2003. Under Ford era several DB series and Vantage cares rolled out of the Aston Martin factory. However, increasing financial pressure had forced Ford to sell Aston Martin in 2007. A joint venture company acquired Aston Martin Lagonda Ltd. for 479 million pounds. Ford however still holds a portion of the Aston Martin stock of worth US$77 million. (Lehbrink and Schlegelmilch, 2005; Rasmussed, 1988; Durham, 2007) Current organizational structure, strategy, culture, values, values, and objectives: Under new ownership the company has set some new targets retaining the age old goals maintaining its uniqueness, high standard as traditional values. At present the majority share of the organization is held by a joint venture company whose owners are Investment Dar, Adeem Investment of Kuwait and John Sinders, an English businessman. At present the company is headed by Ulrich Bez who holds the post of Chief Executive Officer. Philipp Grosse Kleimann holds the post of the director of Business Development. (Aston Martin Lagonda Ltd. – company Overview, 2009) The management of the organization has always realized the existing market requirements and hence while in one hand they have always tried to maintain their tradition, on the other hand they have implemented cutting edge technology of the present time. Hence, at present the management of the company is following the strategy of combining their age old culture, tradition and impressive craftsmanship with high-end technology. It can be said that the organization possess a very interesting and special culture which has made the Aston Martin unique. The company has combined such factors within its organizational strategy which are seemed to be inspirational opposites. For example, there exists a tension between creativity and manufacturing discipline. But the company has embraced both of them. Similarly inspirational motivation behind technical vision contradicts to that for creative enthusiasm. Here again the company has embraced both of them. Thus, while in one hand the company is valuing creativity, on the other hand it also holds a technical vision for long term and tries to maintain discipline in its manufacturing front to ensure high standards and unique features of its products. This cultural aspect of the organization has helped it quite a lot to build harmony among those factors which apparently seem to be contradictory. This kind of distinctive feature of the organizational culture of Aston Martin has resulted in the development of the unique personality of the marque. (Our spirit – Defining Personality, 2009) As for its values, the organization still remains true to its traditional values of maintaining high standards and being capable of surpassing all the performance expectations. (Aston Martin and Bang & Olufsen announce a new bespoke audio system, 2009) As far as the vision of the company is concerned, the management, engineers and designers of Aston Martin hold a common vision. They are all united by a common mission and spirit. All of them aim at enhancing the brand value of Aston Martin to the highest in the industry by making the most impressive sports cars. In order to achieve this goal they have set several short tem and long term visions. An important part of its long term vision is also to revive some of its old models (Key developments for Aston Martin Lagonda Ltd.). In this effort, it has recently announced the revival of Lagonda. The management is expecting that strategy will create new markets across the world for the Company. Newly revived high tech Lagonda with the very unique features of the Aston Martin label is being expected to make a strong presence around hundred international territories and thereby increasing the global reach of the Aston Martin brand and increasing customer base. The company is labeling Lagonda as “the luxury car of the Future” (Lavrinc, 2009). As far as its short term visions are concerned, the organization aims at enhancing its productive capacity by one fourth of the exiting one within 2010 (Buckley and Kennedy, 2007). This growth plan is mainly based on the new model Rapide. At the beginning of the new era under new ownership the company has also set an objective of increasing its employee base by around 200 more workers. But the company is one of the worst recession-hit automobile firms in UK. The sale has dropped drastically which in turn resulted in job cut. Around 600 employees of Aston Martin have lost their jobs ( Peacock, 2008). Under current economic scenario, the company’s business and marketing strategies are not only targeting large car segment, but also to small cars segment. In such an effort, recently it has signed a deal with Toyota motors a well-known name in this market segment. The idea is to develop an Aston Martin labeled car based on the technology used in the Toyota’s IQ model. (Kurczewski, 2009) PESTEL Analysis: Major Political scenario- Participation of the country in the Kyoto Protocol to reduce CO2 emission level. Major Economic scenario- Global economic recession has hit the country. Automobile industry is one of the worst-hit industries. (Stokes, 2008) Automakers are creating jobs in other industries also. Major Social Changes- Increasing differences in the choice of Generation X and Generation Y. Large vehicles are being increasingly preferred. Major Technological changes- Increasing online purchase. Introduction of fuel efficient electric cars by various well known companies. Five Forces of competition: Threat from new entrants- This threat is quite low. The company under consideration serves the high priced large sports car segment. Under current economic scenario most of the firms are focusing on low priced small cars. Apart from this high capital investment possess high entry barrier. Suppliers’ bargaining Power- It is low as there exist quite a few suppliers so switching from one to another is quite easy. Buyers bargaining Power- It is quite high, as buyers have so many options to choose from. They can easily go for another brand as so many national and international brands are present in this segment. Threats from other substitutes to four-wheeler- Increasing popularity of Biking, walking and public transportation as they are saving transportation costs under tight economic condition. Intensity of the competition among rivals- The level of competition is quite high as the level of differentiation among the products are becoming less as all of them are more or less following similar strategies and constantly promoting themselves as the superior than the other claiming their uniqueness in the ads. Major competitors of the Aston Martin are Ferrari, General Motors, BMW, MG Motors, etc. all are very popular brand in luxury sports car segment in the domestic as well as global market. Industry KFS: Use of large scale technology which helps in reducing manufacturing costs and provides huge flexibility in terms of making easy switch from one model to the other. (Company News, 2009) Innovation of new models at regular intervals with unique features combining traditions with high-end technology. Impressive designing. Bond with the extremely popular novel hero James Bond. SWOT Analysis Company Strength: Strong brand value. Maintenance of high standards with unique appealing features throughout the years. The power of change. Making successful harmony between creativity and manufacturing discipline. Management’s flexibility in strategy making. Meeting all the expectations of its buyers in terms of performance on the racing tracks as well as on the roads. It has well managed its commitment to the society by promoting various social campaigns. For example, it has launched a driving campaign named ‘Driving Home Road Safety 2007’ which supported UNICEF and FIA. (Aston Martin Pair Drive Towards The Record Books) Company Weakness: Constantly struggling to maintain its sales volume. Its sales volume has never been very impressive. On many occasions low sales volume gas forced the company to shut down the production. Under current market scenario the company is not being able to maintain its sale level. In 2008, sales volume has dropped by around 67 percent. (Stokes, 2008) Very often the company faced serious financial problems which had actually resulted in so many changes in the ownership. High production cost and low sales volume have always exposed the company to financial difficulties. Although it is entering small car segment, there is big question regarding its success in this segment as already so many firms are serving the market. Since it is new, it also lacks experience required to serve small car market as well as technical expertise as since its foundation it has only served large and luxury car market. Very often the company faces it difficult to meet the environmental challenges. Opportunities: Making a foray into medium or small car segment to attract more buyers with introducing the concept car “Cygnet” in collaboration with Toyota. (Kurczewski, 2009) Marek Reichman has joined the company from Ford. In ford he was the Director of Design for Product. In Aston Martin also he will be a part of the designing team which will design the future model. Marek’s experience is expected to give more strength to the design strategy for future. (Marek Reichman Appointed new Director of Design for Aston Martin. 2009) The plan of revival of some famous models might enhance sale volume. (Lavrinc, 2009) Threats: Economic downturn might further reduce sales. Under the current credit crunch, company might face financial difficulties. Keeping compliance with EU regulations regarding car emissions. To comply with EU huge investment is needed. Strategic Challenge/Issue As present one major strategic challenge facing the firm is their decision to enter into small car Market. The firm is moving into a completely new market segment which it had never served before. Under decreasing sales volume in the automobile industry, particularly in the large car segment, this strategy seems to be a positive move by the company. But with such strategical move, the company might face a number of challenges as it is completely a new entrant in that market and there already exist a number of strongly established firms. One major motive behind undertaking such a strategy has been to increase its sales volume by stretching its market so that the firm might not again fall under a financially critical situation once again. But one problem with this move is that although it is entering the small car segment it is still belonging to the luxury car category. Hence the price range will still be out of reach of a significant portion of buyers in the small car segment. Hence, there is looming a question regarding how far this will help in increasing the sales volume under this tight economic scenario. Apart from this, this particular move of Aston Martin can come to its fans as a shock as it is coming in collaboration with Toyota where Toyota’s iQ technology is being used in this concept car ‘Cygnet’. So to the pure Aston Martin fans, the brand value of an Aston Martin might reduce. (Kurczewski, N. 2009) Strategic Options/Future Strategy The idea of entering into the small car segment is of course quite welcoming. But the particular option that it has chosen to enter into this market might not be successful in future. In stead of making collaboration with other firms and hiring their technology, Aston Martin should adopt the strategy of making their foray into the small car segment completely by their own, instead of any collaboration. Any kind of Collaboration will actually result in comprise on their unique features. They will attract more buyers in the small car segment if they retain their uniqueness and brand value. Fans of James Bond are also quite large in amount in small car segment too. But, the James bond’s vehicle brand will attract its fan only if it retains its uniqueness instead of borrowing technology from others. Implementation and Change Factors As far as the implementation of the current strategy is concerned, the organization has to shift its focus from large car segment to small car segment. If it has to develop small cars by its own, then its designing team has to put great effort for innovating exclusive small cars with features unique to the Aston Martin brand. Since they are completely new in this segment, they lack experience and expertise. Hence unless and until more time, more care and more effort are directed towards developing these small cars, they will not be able to justify with their brand value. They also have to comply with EU regulations on emissions. Hence, while implementing this strategy, the thing should be handles more carefully. At present apart from introducing some new sports car model Rapide, One-77, etc. it is also thinking about revive some of its old products, but for the proposed strategy to become successful, it would be better to place this plan under cover for the time being and place major emphasis on the designing of small car models with innovative technology that will effective compete with other brands and increase sales volume. Once sales volume is resurrected, and it gains experience in the small car segment, it can again focus on its sports car models. References: 1. Peacock, L. 2008. 600 jobs to go at Aston Martin. Available at http://www.personneltoday.com/articles/2008/12/02/48557/600-jobs-to-go-at-aston-martin.html [accessed on 8th July, 2009]. 2. Aston Martin and Bang & Olufsen announce a new bespoke audio system. 2009. 3. Aston Martin Lagonda Ltd. – company Overview. 2009. Available at http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=22654977 [accessed on 8th July, 2009]. 4. Aston Martin Pair Drive Towards The Record Books. 2009. Available at http://www.astonmartin.com/thecompany/news?a=08ec63b3-8ce6-4999-92a4-aafe893d432e [accessed on 8th July, 2009]. 5. Buckley, C. and Kennedy, S. 2007. Rapide speeds up Aston Martin’s growth plans under new owners. Available at http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article1505788.ece / [accessed on 8th July, 2009]. 6. Chen, A., Avigdor, A. And Konkin, J. 2007. Available at External Assessment for Ford Motor, Inchttp://74.125.153.132/search?q=cache:45tVburvDR0J:organized-change-consultancy.wikispaces.com/file/view/Revised_Presentation_Org_Ass_Ford_20070906.pdf+pest+analysis+of+Aston+Martin&cd=2&hl=en&ct=clnk&gl=in [accessed on 8th July, 2009]. 7. Durham, M. 2007. Ford Sells Aston Martin for $925M. Available at http://www.wired.com/autopia/tag/aston-martin/ [accessed on 8th July, 2009]. 8. Key developments for Aston Martin Lagonda Ltd. 2009. Available at http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=22654977 [accessed on 8th July, 2009]. 9. Kurczewski, N. 2009. Aston Martin Joins With Toyota on Small Car. Available at http://wheels.blogs.nytimes.com/2009/06/30/aston-martin-joins-with-toyota-on-a-small-car/ [accessed on 8th July, 2009]. 10. Lavrinc, D. 2009 Geneva 2009: Aston Martin revives Lagonda to questionable effect. Available at http://www.autoblog.com/2009/03/04/geneva-2009-aston-martin-revives-lagonda-to-questionable-affect/ [accessed on 8th July, 2009]. 11. Lehbrink, H. and Schlegelmilch, R. W. 2005. Aston Martin. Konemann. 12. Marek Reichman Appointed new Director of Design for Aston Martin. 2009. Available at http://www.astonmartin.com/thecompany/news?a=4f0497da-5e47-45a1-8311-d9f3c125eef9-company [accessed on 8th July, 2009]. 13. Our spirit – Defining Personality. 2009. Available at http://www.astonmartin.com/eng/thecompany/ourspirit [accessed on 8th July, 2009]. 14. Rasmussed, H. 1988. Aston Martin: The Postwar Road Cars. Motorbooks International, 1988. 15. Stokes, T. 2008. Car sales drop to pre-1970s level Available at http://uk.green.yahoo.com/blog/ecostreet/15/car-sales-drop-to-pre-1970s-level.html [accessed on 8th July, 2009]. 16. Wood, J. 2000. Aston Martin DB4, DB5 and DB6. The Crowood Press. Read More