Global Business and Strategic Concepts - Jaguar Land Rover - Case Study Example

GLOBAL BUSINESS AND STRATEGIC CONCEPTS By Location Global Business and Strategic Concepts Executive Summary This is a paper discusses global business and strategic concepts of Jaguar Land Rover. It begins with the introduction part. At this part, readers are given the basic information about Jaguar Land Rover. The strategy part explains the various strategies that the company has used to enhance their global operations. In this part it is seen that value addition is one of the ways through which Jaguar Land Rover enhances their competitiveness. Further, it is also seen that the company does not only focus on the markets that they are doing well in like the UK, but also invests in markets that seem to be promising, such as China and Brazil. The company has five production facilities, three situated in the UK, one in China, and one in India. There are a number of production issues that Jaguar Land Rover has been facing regarding their global operations. One of the issues is having a production capacity that does not seem to be able to match the probable increase in demand that is likely to take place in the future. Jaguar Land Rover’s performance was also affected by recession something that Tata Motors had to respond to through capital cash injection. There was also the proposed transfer of one production plant from the UK to China. This would lead to economic sustainability, but lead to loss of social credibility. The company has also been facing fierce competition from BMW due to lack of proper customer service strategies. The marketing mix reveals that the company produces premium luxury products, which are only available in areas occupied by the affluent, promoted through TV with the effluent being targeted because they are the people who can afford them. The conclusion suggests that the strategy that the company has been using has been effective, though there are some improvements that can be made. The proposed improvements include investment in customer service, increased investment in emerging economies, and introduction of slightly economic vehicles. Contents 1.Executive Summary 2 Contents 4 2.Introduction 5 3.Strategy 5 4.The Main Production Issues 10 5.The Strategic Role of Foreign Factories 10 6.Current External Influences 12 a)Production plant closure 13 b)Recession 13 c)Company Image & Brand Loyalty 14 d)Competition from Other Luxury Car Makers 14 7.Marketing Mix 15 a)Product 16 b)Place 16 c)Promotion 16 d)Price 17 8.Recommendation 18 9.Bibliography 19 2. Introduction Jaguar Land Rover (JLR) is a British automotive company that resulted from the merging of two companies: Jaguar Cars and Land Rover. The company has its headquarters in Whitley, Coventry. JLR is also a subsidiary of Tata Motors. This company designs, develops, and manufactures vehicles under the Land Rover and Jaguar marques. These marques had high levels of popularity even before the merging took place in the year 2002.JLR was later acquired by Tata Motors in the year 2008 (Hutton 2013, p. 35). JLR is well known for the production of premium luxury vehicles which usually come at a very high cost. Being a company with global presence, the company has always strived to make sure that they use the right strategies to cope with the high levels of competition. This paper is a discussion of global business and strategic concepts of Jaguar Land Rover. 3. Strategy (Strategy has to have those points . To increase profitability and profit growth, firms can add value lower costs sell more in existing markets expand internationally) There are a number of things that Jaguar Land Rover does in order to make sure that they are in a position to enhance their profitability. One of the ways through which they are able to enhance their profitability is through value addition. In the year 2014, the company’s CEO gave a statement that was aimed at giving the public information about the plans by the company to design and produce next generation vehicles, which will be unbeatable in terms of quality, sustainability, and reliability. The new strategy was supposed to be in effect to their productions and operations (Tiwari & Herstatt 2014, p. 99). This strategy involved highly investing in innovation and production technology. These two factors have proved to be important in quality automotive design and production. The CEO points out that their brand new £500 million engine plant was a perfect example of the things that the company was doing with the aim of making sure that the value of the products that they avail in the market is highly competitive. The company has always strived to make sure that their products are greener by reduction of the carbon emission that results from the use of their products. The company has a state of the art production line in Castle Bromwich givre innovation utmost consideration. The most notable aspect of the production line is the multi-million-pound machines and hi- tech robots that work in synchrony with the highly skilled human resource that the company is always keen in selecting. The brand is well known for beautiful designs and excellent engineering leading to the production of highly attractive products. The fact that jaguar vehicles are always made to order makes it easier for the company to produce highly unique products that are able to fulfil the preference of specific customers. Given the nature of vehicles that are produced by Jaguar Land Rover it is challenging for the company to be price competitive. Most of their products are luxury vehicles which makes it hard for them to compete with other brands that produce economic vehicle such Toyota Motor especially for the segment where consumers look at the efficiency and economic viability of an automotive product before they buy it. However, Jaguar Land Rover has a new strategy which focuses on promoting Jaguar XE and Land Rover Discovery Sport, the two most business friendly models will be focused on making these two models a little bit more affordable. Jaguar Land Rover’s global strategy focuses on both existing markets and venturing in new ones. This implies that the company strives to keep the markets that they are already dominant in while at the same time venturing on new markets, according to the markets that their researches show that they might do well. As a result of this combination, the company has been able to significantly enhance their global presence (Gong 2013, p. 117). The brand was known for its good performance in the European market, and nothing has changed regarding their popularity in Europe. This has only been possible through continuous strategizing on their European operations to make sure that they remain popular. However, the company moved away from their comfort zone in search for new challenges by venturing into new markets in Asia and South America. Organizational Architecture (over here i need to have academicly underpinned porters diamond, whether the company has functional structure or divisional structure. And how the company is globaly interconnected. Where is the headoffice for example, where is the research and development and where is the main supplyers coming and why ) Jaguar Land Rover is headed by a board of directors that consist of two directors and the CEO. These are the people who are charged with the responsibility of making the biggest decisions. The company has six facilities that are always used for manufacturing and assembling their products. Five of these facilities are located in the UK while one in located in India. In the UK, Jaguar Land Rover has three research and development facilities, namely: Gaydon, Whitley, and Warwick Manufacturing Group, University of Warwick. Gaydon is an engineering and development centre; Whitley is an engineering and development centre which is also used as the headquarters of the company. Warwick Manufacturing Group, University of Warwick is used for advanced research and development of new models. The Warwick manufacturing Group is wholly owned by Tata Motors and is based at University of Warwick for convenience purpose. ) 4. The Main Production Issues Over the recent past, there has been a notable increase in demand for Jaguar Land Rover product in America and in the Far East. However, there are concerns regarding the company’s production capacity and if they will be able to cope with the clearly increasing demand in their products. It is believed that the company’s capacity is likely to contribute to a decrease in the rate at which the company’s profit grows. However, with the opening of their first foreign direct investment in china, the company has been considering doing the same in the United States of America and Brazil. This will be in reaction to the increase in demand in the two regions. What should be known is the fact that having assembly plants closer to existing and emerging markets can be effective in increasing the profitability of the company. The production cost will decrease and the company will also have an effect to the societies where their products are consumed through provision of employment opportunities to local people and other social sustainability activities that business organizations can involve themselves in. 5. The Strategic Role of Foreign Factories To Jaguar Land Rover the use of foreign factories such as the one in China can prove to be of high importance. In cases where global companies have production facilities in foreign countries, it is always said that they are getting involved in foreign direct investment. In the case of Jaguar Land Rover, the foreign direct investment has taken place as a result of Greenfield investment which is the establishment of a new production facility in a foreign county. The choice of greenfield investment is appropriate in such a case because enjoys certain advantages such as reduced cost of production due to availability of affordable human resource. There is no form of acquisition or merging that takes place in order for this foreign direct investment to take place. However, it should be noted that the company’s investment in China is in collaboration with a Chinese company by the name Chery. Chery has been partner with Jaguar Land Rover’s parent company, Tata Motors for some time now. The investments in China are particularly made possible through the political and economic changes that has taken place in China in the recent past, making it easier for foreign companies to invest in China. The change from communism and abandoning of legislations that were meant to over protect the local industries in China means that foreign companies such as Jaguar Land Rover have an easier time investing in the country. Globalisation of markets means that business organizations such as Jaguar Land Rover look at the global market as their target (Saunders 2011, p. 187). Companies are no longer satisfied with conquering local markets. In the automotive industry, it can be noted that globalization came rather earlier because of the fact that here were not many countries having automotive production industries, despite the fact that these products were consumed all over the world. This can be used to explain the fact that Jaguar Land Rover believe that their investment in will not be the last, with the US and Brazil being their next probable targets. As for Jaguar Land Rover, foreign direct investment is a way through which they can be able to improve more than just economic sustainability. When they make foreign investments such as the one made in China there are many benefits that they bring to the local country. For instance, as a result of their assembly plant in china they are able to offer employment opportunities to hundreds of people. What should also be noticed is the fact that the local government will also be able to earn some revenue from such activities. The production plant in China deals with specific models. This is done strategically because the company knows very well that not all their models are demanded by the Chinese market and the countries around china (Tiwari & Herstatt 2014, p. 109). It will not be economically viable for a company to produce products that are not popular in the local market. This is strategically done to make sure that the economic sustainability of the foreign direct investment is enhanced. This is a factor that is likely to affect Jaguar Land Rover’s future foreign direct investments. This is because they will be aimed at making the investments as sustainable as possible. 6. Current External Influences In the recent past the automotive industry has been experiencing much pressure than it has ever experienced before. Some brands have even been forced to sell or merge with other companies so that they can be able to withstand the pressure that is currently felt in the industry. Before Jaguar Land Rover was acquired by Tata motors, the performance was in no way near being impressive (Singh 2011, p. 165). This is the reason as to why many people believed that Tata Motors was able to easily acquire Jaguar Land Rover, which was by fact a result of the merging of two automotive producers: jaguar motors and Range Rover (Atwal & Jain 2012, p. 145). Since the acquisition took place in the year 2008, there have been some significant improvements in terms of performance and profits. One of the main challenges that Jaguar Land Rover has been facing results from the economic crisis that hit the global economy. The company has been trying to make sure that they minimize their cost of production in all the ways that they can. However, the company has also been cautious and has made sure that even if they were striving to reduce the cost of production, the quality of their products still remains to be impressive. In most cases, the term cost reduction is always associated with reduction of the number of employees leading to loss of jobs by some employees. This can result to a negative attitude by employees because none of them will feel that their jobs are secure. They will always work knowing that they can lose their jobs any time (Khanna, Palepu & Bullock 2010, p. 213). This is not good news for HR managers because it makes it even harder for them to ensure that employees are motivated. a) Production plant closure Jaguar Land Rover has been considering closing down one of their three assembly facilities in the UK. One of the main reasons given for the poor performance of Jaguar Land Rover by the previous owner, Ford Motors, is that the company was having very high costs. When Tata took over the company, one of their strategies was to reduce the cost of production by outsourcing those functions that they had noticed to be burdened to the company (Wheelen 2014, p. 129). In the course of reducing the cost of producing the new management plan to close down one of their manufacturing plants in the UK and move the operations to China, where the company is likely to benefit from the low cost of production. From an economic point of viewing, the company will highly benefit from the transfer of part of their operations from the UK to China (Lent, Tour & Lent 2009, p. 203). This has been seen to be a way through which the company will be able to reduce their cost of production and eventually their profitability. However, from the social point of view the closure of the factory will be disastrous. This is because the closure of the factory will mean that most of the employees who have been working at the factory will have to lose their jobs. A few of them who will be lucky will be able to be fixed in the remaining factories in the UK. At the moment Jaguar Land Rover provides employment opportunity to more than 140000 people in the UK (Luthans&Doh 2015, p. 172). It is also important to note that even if the current employees would agree to be relocated to the new plant, the company would not hear of it because the company has a chance of getting cheap labour in China. It should be taken into consideration that the main reason as to why the company wants to relocate these operations to China is to reduce their production cost. b) Recession The automotive production has highly been affected by the current economic situation. Many companies in this industry had to suffer to an extent that some of them had to halt their productions. Some of the companies even had to close down or merge in order to cope with the effects of the economic situation (Birkinshaw 2014, p. 218). Many companies had to reduce the number of employees that they had, with some of them recording losses. Just like the other companies, Jaguar Land Rover was not an exception. One of the ways in which Tata Motors responded to this situation after the acquisition was capital cash injection. In order to make sure that the funds were secured, the company approached the UK government for some financial assistance. Disagreement in commercial term made it impossible for Jaguar Land Rover to be granted this request (Bruche, 2010, p. 123). However, Jaguar Land Rover was eventually able to secure loans from banks. This strategy is believed to have been successful because Jaguar Land Rover recorded a pre-tax profit of £32m in 2010 despite the fact that they had recorded a loss of £281m in the previous year. c) Company Image & Brand Loyalty Even before the merging of Jaguar and Land Rover both brands were highly respected with regard to the production of luxury vehicles. When they merged they commonly formed the reference for quality and class in the automotive industry. Given the fact that the brand is a UK brand they are likely to do better in the UK market as opposed to foreign markets such as China and the US. The loyalty to the brand has been observed to be very high in the UK. It is advisable for the company to make sure that they do not lose the loyalty that they have from their UK customers (Clegg et al., p. 821). As much as it is important and profitable to go global, they should make sure that they keep their presence in the UK market intact because this is the market where they are less likely to face stiff competition. d) Competition from Other Luxury Car Makers The luxury vehicle segment of the automotive industry is highly competitive. The competitiveness is even made stiff by the fact that every company in this segment has been striving to make sure that they enhance their global presence. At the moment, the main competitors of Jaguar Land Rover in this segment are Mercedes and BMW (Ille & Chailan 2011, 89). BMW has been particularly a very fierce competitor of Jaguar Land Rover. Records show that the sales of BMW globally can be about 6 times more than the sales of Jaguar Land Rover. The competition between BMW and Jaguar Land Rover has been so fierce that both brands have been strategically using promotional activities to outshine the other. However, Jaguar Land Rover has responded to this situation be undertaking an in-depth customer analysis. At the moment Jaguar Land Rover is associated with retired high earning officers. This might not be wrong, but is a kind of narrowing down of the segment (Gong 2013, p. 233). BMW on the other hand is known for the use of high level of customer service so that they can be able to satisfy their customers. This is an implication that Jaguar Land Rover will have to work extra hard in any case they want to overturn BMW’s dominance in this segment. One of the ways through which they can be able to achieve this is through improving their customer service practices. This would include improving some aspect of customer service such as competency, availability, and response time. 7. Marketing Mix The marketing mix (the choices the firm offers to its targeted market) is comprised of a. Product attributes b. Distribution strategy c. Communication strategy d. Pricing strategy a) Product Products that are produced by Jaguar Land Rover can be identified by qualities such as smoothness, fastness, and luxury. Unlike some of their competitors such as BMW who happen to have low cost vehicles, Jaguar Land Rover does not believe in attracting masses, but only a particular segment of the market. Jaguar Land Rover is popular with people who are willing to spend highly in their vehicles (Harper & Wells 2012, p. 163). The mileage of the vehicles produced by Jaguar Land Rover also happens to be very low, meaning that maintenance and running costs are also very high. This means that the products can only be purchased by people who have the financial ability to pay for the costs related to having these vehicles. b) Place There are a number of ways through which Jaguar Land Rover products reach their consumers in various parts of the world. In most parts of the world the products are sold through dealerships. Their showroom and dealer outlets are situated only in the premium urban areas all over the world because Jaguar Land Rover is not a brand that targets everyone (Bruche 2010, 231). Most of the time the products are exported to various parts of the world because of the fact that these products are not sold in masses. c) Promotion For a long time now Jaguar Land Rover has been known to highly use television advertisements to promote their vehicles. With such activities they usually make sure that they target only a segment of the market. Jaguar Land Rover widely uses television adverts to introduce new models (Bruche 2010, p. 111). They have also involved themselves in a number of sponsorship deals. d) Price Jaguar Land Rover vehicles are known for their high prices. Given the fact that the brand is known for the premium class luxury vehicle, only people who are financially able can afford them (Bruche, G 2010, p, 123). Conclusion Given the discussion made herein it can be concluded that Jaguar Land Rover employs a number of strategies in making sure that their global presence is enhanced. The organization structure has been able to show just how much the company has been able to use their strategy to remain relevant in a highly competitive market. They have factories in the UK, India, and China. The UK factories are strategic because of the fact that the brands main market is in the UK. Furthermore, the company is based in the UK, despite the fact that it is owned by an India based corporation, Tata Motor. The facility in India is convenient because of the fact that the parent company is based in India. The company was attracted to China because of the fact that they could lower their production prices in response to the recession that made the luxury vehicle hardly profitable. China is basically popular for the availability of cheap labour which makes it a good destination for FDI for companies such as Jaguar Land Rover. Jaguar Land Rover was only able to survive as a result of capital cash injection made by the Tata Motors. It has also been seen that the company has effectively built their marketing mix to suit each other. They make sure that they apply technology and innovation in the production of highly luxurious vehicles. Due to the nature of the products that they produce they make sure that they do not avail the products in masses. Their products are not available everywhere, but only in places where their targeted market is concentrated. They also use television adverts that are particularly attractive to the segment that they target. Due to the high quality of their vehicles, the company is able to charge high for their products without having to worry about customers shying away from the brand. The company has a high level of loyalty in the UK market. Globally, they face competition from BMW and Mercedes, with BMW being the fiercer. BMW has evidently been beating them in customer service, with Jaguar Land Rover focuses on customer research. Unlike, Jaguar Land Rover which focuses on production of premium luxury vehicles only, BMW also produces products that are more economical in reaction to the rate at which people are being affected by the global economic crisis. 8. Recommendation Given the nature of the products that Jaguar Land Rover has been producing it is clear that the strategies that they have been using have been effective. However, there are a number of things that they can do in order to increase their global competitiveness. For instance, if they could invest more in their customer service practices. This will be a good strategy in increasing their ability to satisfy the wants of their customers. Foreign direct investment in emerging markets with low costs of production such as Brazil will also be advisable. Just like in the China scenario, they will be able to produce products at a low cost, thus helping them in coping with the economic crisis and the increase in demand for their products. Jaguar Land Rover should also consider producing products that are slightly economical so that they could be able to broaden their targeted segment. 9. 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