Decision Making Strategy and Product Life Cycle - Report Example

Decision making Considering the importance of minimizing expenses and the opportunity of expanding the influence sphere in the North American market,the decision of creating a new plant in the USA to serve the North-American segment of the target audience should be thoroughly considered and analyzed. The three key aspects of the decision process should be reviewed: 1. JLR Strategic basics. 2. The current business and marketing environment. Development plans 3. Pros and cons Considering the fact that sustainability is one of the key aspects of the business model performed by Jaguar Land Rover, it should be emphasized that the decision should be based on the presumption that the company will continue developing sustainability. Strategy and Product Life Cycle The present marketing situation, as well as the phase of the company development should be regarded as the basis of the decision making process. Therefore, prior to starting the analysis, the essential elements of the Jaguar Land Rover strategy should be reviewed. These are: 1. Product line and sustainable product life cycle; 2. Social responsibility; 3. Business growth: new products, Research and Development; The company is highly concerned in developing a business model that will contribute the overall nature and climate protection, by investing into green technology, implementing low-carbon solutions into the vehicle building technologies, and developing green materials for vehicle production. Therefore, product life cycle is considered as the key aspect of the proper strategy development, since it involves all the three components of the strategy. It is divided into 7 phases: 1. Design: This is the basic step of developing a “green” product, and reducing the CO2 emissions for the future models. The stage involves developing safety, energy saving and durability technologies. 2. Raw material production: the company deals with the sustainable suppliers. This is essential for the final cost reduction also, since “green” suppliers offer lower prices as a rule (_11) 3. Transporting: the properly developed logistics strategy helps reducing the transportation costs, as well as CO2 emissions. 4. Manufacturing: emissions to air, soil, and water are thoroughly controlled by implementing filters, and energy saving technologies. Additionally, the waste and emission control helps implementing the waste recycling technologies, which is also helpful for cost reduction. 5. Delivery to customers: the shorter delivery ways help reducing emissions and costs. Similarly to material and components transportation, shorter ways are required for cost and emission reduction. 6. Product use: this point involves not only CO2 emissions, but customers’ safety also. Lowering fuel consumption, and caring of the passengers and pedestrians safety increases the attractiveness of the product for the target audience. 7. Life cycle end: in order to reduce wastes and harm, caused by certain materials, the company is performing an efficient recycling program. Considering the opportunity of the new plant building, in case the new plant building contributes the emphasized factors, the decision will be positive Marketing Environment and Development Plans First, it should be stated that the expansion plans are not new for the Jaguar Land Rover, and in accordance with the strategy report (_8) the company expanded to India. The new assembly line was built, since Indian market is regarded as one of the key marketing directions for JLR. Additionally, the company announced in 2011 (_6) that the production capacity will be doubled by 2020, and additional manufacturing facility will be built in China. In the light of this fact, it should be emphasized that the company will need to allocate additional resources for building the new plant, and further restructuring of the development, marketing, supply chain and sustainability strategies. The marketing environment in the USA should be analyzed also for developing the argumentation. With the PEST analysis the key aspects of the environment will be regarded. Political The political environment in the USA is regarded as beneficial and favorable for the sustainable business development. It is explained by the fact that the US government is highly concerned with the green legislation, supporting companies that implement energy efficient technologies. (__5) Considering the philosophy of the JLR business model, such an environment will promote effective business development. Economic From the economic point of view the US environment is not so favorable since the credit standards for the automotive industry are quite loose, and the interest rate is expected to increase at 3,7% (__13). The ICE car sales (including used cars sales) have dropped, while the prices continue growing. In accordance with the report by (__15), the situation is worsened by the fact that the consumer crediting programs are reluctant in offering credits for used cars, while the large portion of the industry customers cannot afford a new vehicle: “Consumers with poor credit (a large portion of industry customers) have been among the worst hit. Consumers with D-grade credit spent $11.0 billion at used car dealerships in 2009, a 51.7% decline from 2008.” (__15) Nevertheless, the sales of the used cars grew by 33% from 2008 to 2012, and 2% growth is expected in 2014 (NADA__17), correspondingly, the new car sales are expected to grow also. Social The year 2014 is expected to become socially beneficial for the automotive industry in the USA. (__33) In accordance with the CAR (_27) sales forecast, up to 16.5 million new cars is expected to be sold, while the loaning programs tend to lower the interest rates in order to stimulate the penetration of the new car loaning programs. Technological Considering the technological environment, the market is highly penetrated with hybrid and electric vehicles. In accordance with the Cleantechnica (2014) analysis, Atlanta, California and Washington are regarded as the states with the fastest growing networks of the electric vehicles charging networks. Additionally, the sales of the electric cars has jumped in 2013. Nationally, the EV sales grew by approximately 430% in comparison with 2012. New Plant in the USA. Pros and Cons Building of the new full-cycle plant in the USA is very unlikely, since raw materials delivery will inevitably generate high expenses for the overall product line. In accordance with the latest tendencies, the vehicle manufacturers that are aimed at penetrating the US market, prefer creating assembly lines only. Considering the fact that the January 2014 sales of JLR models in the USA were 31% up in comparison with January 2013, the new assembly line will help adding 24% to the growth rates (North America Today, 2014). However, considering the growing demand for electric and hybrid vehicles, it should be emphasized that the company will need to expand the current model line. Such an expansion will require additional expenses for research and development in the sphere of electric systems. Moreover, with the increased sales rates, the additional assembly line may be required. In this case, the company may need to take GM experience into consideration when one assembly line is intended for a single model. The possible pros and cons of the new plant building are regarded below: Pros Cons - Proximity to the supply chain and transportation hubs; - Increased list of US oriented suppliers; - The gradually improving economy of the US market stimulates the Rapid growth of the electric and new cars market; - Closer location to the target audience for energy efficient cars; - CAFE (Corporate Average Fuel Economy) standards create an effective barrier for competitors that do not have a properly implemented fuel efficient technologies; - Ability to penetrate the EV US market - The wide range of hybrid models; - Domination of the new vehicle market over the used vehicle market; - Increased costs for supply chain restructuring; - Electric vehicles model line requires further development, since most current models have been upgraded with electric engine systems without essential redesign. (Jaguarlandrover.com 2013); - CAFE standards are regarded as the barrier for effective economic development. (_19); - Occupational Safety and Health norms in the USA are stricter in comparison with Asian regions, where the most production capacities are located at the moment. The company will need to implement new management practices; Penetration pricing strategy is one of the most effective marketing strategies available to a business organization. However, this strategy can be used only in specific situations when the business is in a strong position to sustain itself even with a penetration price. This strategy involves setting a low entry price for a new product or brand in order to gain a breakthrough in a highly competitive market. The strategy can also be used when introducing a completely novel product in the market or when tapping a new market segment for an existing product. A company employs penetration pricing with the expectation that eventually the price will be raised once the initial marketing objectives are fulfilled. Its aim is to attract the customers to try the company’s product. By keeping the price intentionally lower than established competitors, the business aims to compromise existing brand loyalties of the customers. The ultimate goal of this strategy is not to maximize profits, but to allow a new product or brand to gain a foothold in the marketplace. Read More