Business Process: Lamborghini - Case Study Example

BUSINESS PROCESS: LAMBORGHINI Name: Course: Tutor: Institution: City and State: Date: Business Process: Lamborghini 1. Executive Summary Automobili Lamborghini is currently one of the world’s leading manufacturers of luxury sports cars. Ferruccio Lamborghini started the company in 1963 and since then the firm has produced some of the most iconic vehicles ever seen such as the Lamborghini Miura, Murcielago, Espada and Countach. With these productions, the company has built a strong reputation as a manufacturer of elegant, innovative, classy and exclusive cars. Lamborghini’s current portfolio of products boasts three high-end cars, the Lamborghini Gallardo, Aventador and Sesto Elemento (Sixth Element). Only the first two are road-legal, with the Sesto Elemento being a track-racing car. Lamborghini currently operates as a holding belonging to Audi, which is owned by the Volkswagen group. The company operates under the supervision and guidance of Audi, with a supervisory group within the latter containing members who overlook Lamborghini’s operations. The recent economic downturn dealt a blow to Lamborghini, with the company recording decreases sales over the past few years. In 2011, the firm sold one thousand two hundred units. The firm currently faces stiff competition from three other manufacturers, Ferrari, Porsche and Maserati. 2. Company Background Automobili Lamborghini is a vehicle manufacturing company that is owned by Volkswagen, through the subsidiary, Audi. Founded in 1963 by Ferrruccio Lamborghini, the company is famous for making luxury sports cars targeting that target the high-end market. Automobili Lamborghini has its headquarters and main production facilities at Sant’Agata Bolognese, in North East Italy (Company profile, 2013). The company’s vehicles are some of the most desired by car enthusiasts all over the world, with some setting milestones within the vehicle-manufacturing world such as the Miura, Countach and Diablo. Lamborghini operates as a holding owned entirely by Audi, which is itself a subsidiary of the Volkswagen Group. Volkswagen is the largest shareholder of the Audi group and is in control of more than ninety-nine percent of the subsidiary’s capital (Audi AG, 2012, p. 6a). Audi divides its organizational structure into a management board and a supervisory board, with some members in the latter being charged with looking into the operations of Lamborghini. Automobili Lamborghini has its own board of directors that is headed by Stephan Winkelmann, the president of the company. Within the board, different board members are placed in charge of different departments. Under the board members are a range of department heads and bosses who deal directly with the workers in the company (Audi AG, 2012, p. 257b). For years, Lamborghini has built a strong reputation as one of the world’s leading manufacturers of luxury sports cars. Famous vehicles that Lamborghini has created in the past include the 350GT, Espada, Diablo, Countach, Miura, Reventon and the Murcielago (Company profile, 2013). Lamborghini currently has two road legal cars in production at the Italy plant, the Gallardo and the Aventador. The firm also manufacturers the Lamborghini Sesto Elemento, a track car, and are currently working on another road legal vehicle, the Veneno (Company profile, 2013). SWOT Analysis Strengths The company has established itself as an elite firm that targets the needs of a very specific consumer class (Company profile, 2013). This has given the firm and its products a reputation for being innovative, elegant and classy. Lamborghini manufacturers an average of one thousand vehicles each year and this gives its products a touch of exclusivity (Audi AG, 2012, p. 1b). When coupled with the company’s prestige, the exclusivity of the products makes them a major selling point. Weaknesses The company targets a very narrow market and therefore registers very low sales in comparison to other vehicle manufacturers. In 2012, Lamborghini sold a meagre 1,600 units while other manufacturers under the Volkswagen umbrella, such as Audi, were able to sell as many as seven hundred thousand units (Audi AG, 2012, p. 1b). The company’s products are very expensive, with a single unit costing as much as $300,000 (Automobili Lamborghini holding S.p.A. company information, 2013). This makes it difficult for the firm to expand its sales and reach out to new consumers. Opportunities Lamborghini recently revealed an SUV concept that could help the company broaden its customer base and gain access to a wider portion of the market. Over the years, Lamborghini has established a strong reputation as one of the leading car manufacturers globally. The company could use this prestige to manufacturer cheaper sports cars targeting a wider market range to help boost sales and make it possible for the company to expand its operations and perhaps challenge corporations such as Porsche in terms of annual sales. Threats The 2008 financial crisis affected most of Europe and the United States, key target markets for the company. Following this crisis, vehicle sales went down by fifty percent between 2010 and 2011. As a result, Lamborghini are still struggling to recover from the crisis meaning that the weak global economy still poses a significant threat to the company (Ebhardt, 2013). The constant growth of other competitors in the luxury sports car industry is threatening to reduce Lamborghini’s market share in the sector. For instance, as Lamborghini’s sales decline, Ferrari, a key competitor, have recorded an increase in sales between 2011 and 2012 (Fiat S.p.A, 2012, p. 133). 3. Market Analysis Competitor Analysis Automobili Lamborghini is a firm dedicated towards the production of luxury sports cars. The company’s products are unique in their design, performance, pricing and purpose. For this reason, Lamborghini only has access to a very narrow section of the automobile market. The company mainly competes with other manufacturers of luxury sports cars that are in the same category. Lamborghini’s main brand competitors are Ferrari, Porsche, Lotus and Maserati. Each of these brands has certain strengths and weaknesses that work towards helping the companies build competitive advantages in the market. One major competitor that Lamborghini has had to deal with over the years is Porsche. The famed car manufacturer maintains a strong grip in the luxury sports cars market recording some of the highest sales in the sector. Porsche operates as a subsidiary of Volkswagen and it operates within wider parameters, targeting a range of consumers wider than that of any other player in the luxury sports cars market. Along with sports car brands such as the famous 911, the Carrera GTS and the Boxster, Porsche also manufacturers a range of SUVs, the Porsche Cayenne and a four-door sports car, the Panamera (Porsche SE, 2011, p. 118). The last few years have seen Porsche record a high number of sales in within all of its target markets. In 2010, the company’s total sales came to 41, 749 units, a thirty-seven percent increase from the previous year’s figures. More than sixty percent of those sales came outside the luxury sports cars niche, with 20,914 Cayennes being sold in that financial year, along with 9,900 Panameras. Despite this, Porsche were still able to sell more luxury sports cars than any of the competitors, with their sales in that specific market totalling at 11,791 (Porsche SE, 2011, p. 118). Ferrari S.p.A. is one of Lamborghini’s main competitors in the luxury sports cars market, due to the prestige and elegance attached to the reputation of both brands. Fiat, an Italian automobile company, owns a large stake in the company and is involved in the firm’s operations (Fiat S.p.A, 2012, p. 105). Market analysts widely consider Ferrari to be Lamborghini’s direct competitor in the market. This is because both companies focus solely on the luxury sports cars niche without attempting to create products for other consumers. This differs with other competitors in the industry who manufacture products targeting other consumers such as Porsche (Sports Utility Vehicles (SUV)) and Maserati (family sedans). Similar to Lamborghini, Ferrari’s decision to focus on a specific market section has resulted in low sales in relation to other players in the market. Despite the recent economic downturn, Ferrari was able to record successive sales increases over the past three years leading to record sales for the company in the year 2011 as the firm sold seven thousand and one units. The total revenue for Ferrari in that same year was two billion Euros (Fiat S.p.A, 2012, p. 133). Maserati is another major competitor in the market sector. The company is also owned Fiat, an Italian automobile company, and is renowned for the manufacture of unique sports cars (Fiat S.p.A, 2012, p. 89). The company focuses on the production of luxury sports cars that consumers can use in day-to-day activities. The company’s production process is aided by experience on the racetrack. In 2011, Maserati’s sales went up by 8.5% as the firm sold 6,159 vehicles, generating five hundred and eighty-eight million Euros in income (Fiat S.p.A, 2012, p. 96). The bulk of Maserati’s vehicles were sold in the United States, where the sales figures accounted for up to twenty percent of the organisation’s total. The second largest market for the firm was in China, as Maserati were able to sell 842 units in the country in 2011 (Fiat S.p.A, 2012, p. 96). Branding and Positioning Lamborghini’s branding and marketing has contributed widely to the company’s success and reputation within the automobile industry. When Ferruccio Lamborghini founded the company in 1963, he selected a raging bull as the firm’s logo (Company profile, 2013). Since then the logo has gone on to become one of the most famous in the world, thanks to the company’s reputation and effective merchandizing techniques. Because of this branding, Lamborghinis have become some of the world’s most coveted sports cars. A key element of the company’s operations is exclusivity. Unlike most another sports car manufacturers, Lamborghini produces high-end cars in limited numbers, a quality it shares only with Ferrari. Each year, the company manufacturers a relatively small number of vehicles numbering between four hundred and one thousand units (Automobili Lamborghini holding S.p.A. company information, 2013). As a result, Lamborghini maintains a high level of prestige regardless of the fact that it enjoys only a fraction of the market that rivals such as Porsche do. Market Segmentation Unlike other car manufacturers, the luxury sports car industry selects a very specific section of the market that is willing to pay high prices in return for high-end vehicles that boast speeds as high as two hundred miles per hour. The companies involved in this specific market section dedicate their resources towards manufacturing vehicles that satisfy the needs of that target market. Key features of these vehicles are normally powerful engines, high speeds, comfort and elegance. Clients are primarily found in Europe, North America and the Far East (Audi AG, 2012, p. 32b). The targeting of this specific market has proven to be quite lucrative for Lamborghini as sales of only one thousand seven hundred units are able to guarantee the company high levels of income. 4. Strategic Choices Ansoff Matrix The Ansoff matrix uses a two by two grid to analyse the options that a company has at its disposal should it wish to increase its revenue or profitability. In the model, a company is presented with four possible options that entail commercial action, more than one option can be applied in the firm’s strategies (Meldrum and McDonald, 2007, p. 126). For Automobili Lamborghini, an Ansoff Matrix would entail four options. In the first options, the company would look to focus on products that already exist within markets that have been identified. The second option for Lamborghini is to introduce new products into existing markets. The firm could also consider providing the products it has to new markets. The last possible alternative is to come up with new products for new markets (Meldrum and McDonald, 2007, p. 126). Due to the market share controlled by other players, Lamborghini cannot effectively apply most of the strategies identified above. It would be extremely difficult for the company to try to introduce its products to a new market because of the high cost of production for the vehicles. Similarly, the company would not want to create a new product for a new market, because it would lose the exclusivity currently associated with its brand. The strategy of creating a new product for an existing market would be quite risky because of the possibility of losing key attributes of Lamborghini’s cars such as engine power, elegance and class. The best strategy for Lamborghini now is to focus on the existing market and product. Though the strategy has seen the firm left behind by competitors, it will allow the company to build on its strengths now and make it possible for ventures into new markets and products in the future. PEST Analysis The political environment in which Lamborghini operates is dictated by the situation in Italy and the European Union. The Italian political situation is unstable and unfavourable for the company’s operations. Recently held elections are expected to help the country recover from its recent economic malaise but most experts are expecting the recovery to take a while due to distrust between parties within the coalition government (Ebhardt, 2013). After the new government has settled, it will require some time to work on tax cuts and similar measures that can reduce production costs for firms and increase purchase power for consumers. However, the government remains committed towards working together with the motor industry to help improve the situation and see the sector recover from a decline that has seen sales hit a thirty-four year low (Ebhardt, 2013). The current economic situation in Europe and Italy is having a negative effect on the operations of the entire motor industry, including Lamborghini. The continent is still recovering from the 2008 global financial crisis and sales are yet to hit the highs that they had before the downturn (Ebhardt, 2013). While firms such as Ferrari and Porsche are already recovering, Lamborghini is yet to make a full comeback as it records timid sales, especially in Europe. Lamborghini’s specific target market makes it unlikely that the firm will have to deal with closures of its production plant, but the situation still has negative implications as sales continue to fluctuate over the last few years. Lamborghini’s status as one of the most exclusive and prestigious vehicles in production gives it a significant advantage over other competitors. The company’s products target a specific section of the market and are able to capitalize on the needs and demands of that market. The company can utilize the prestige that people in the West attach to luxury sports cars as a major selling point for its products. One of Lamborghini’s key advantages is the technology found in its cars and products. The company currently designs some of the most powerful engines in the automobile industry such as the ten-cylinder, 5, 204 cc engine found in the new Gallardo LP 570-4 (Audi AG, 2012, p. 84b). Technological marvels such as these have given the company a strong reputation and this can be used to propel the firm to further success. However, the cars engines cannot be used to create a competitive advantage for the firm. Most of the technology used in the machines is designed in collaboration with other industry players, meaning that the firm cannot monopolize it for an advantage. Opportunities for NPD Lamborghini produces a limited number of products to target a very specific section of the automobile market. The production cost for each unit it produces is quite high and this means that the company has to sell its product for prices as high as $300,000 (Automobili Lamborghini holding S.p.A. company information, 2013). Additionally, the company only has one production plant, in North Eastern Italy. These factors mean that Lamborghini’s opportunities for producing a new product in the near future are greatly limited. However, the company’s technological superiority could prove to be its main incentive to come up with a new product to be distributed to the markets it already has access to. 5. Conclusion and Recommendations Lamborghini’s strategy of targeting a very specific market with a highly valued product has helped the company build a strong reputation at the expense of having a larger share of the market. While the strategy worked well in the past, the recent economic crisis may force the firm to consider other strategic options. One possible solution could be the introduction of more products to its portfolio. This could help the company to diversify the products to some extent and target a wider section of the market. Another possible strategy would be to introduce a new product into the market it already accesses. While this strategy would risk costing the firm some of the more valued attributes of its products, it could be what Lamborghini needs so that it can turn the tables on key rivals such as Ferrari and Porsche, who are currently enjoying larger shares of the market. References Audi AG 2012, Interim financial report 2012, Audi AG, Ingolstadt. Audi AG 2012, 2011 Annual financial report, Audi AG, Ingolstadt. Automobili Lamborghini holding S.p.A. company information 2013, Hoovers, viewed 09 December 2013, < http://www.hoovers.com/company-information/cs/company-profile.Automobili_Lamborghini_Holding_SpA.4f4754ae3f48db7e.html > Company profile 2013, Lamborghini, viewed 09 December 2013, < http://www.lamborghini.com/en/company/company-profile/ > Ebhardt, T 2013, Fiat turns to Germany as Italy sales seen worst since ’66, Bloomberg, viewed 09 December 2013, Fiat S.p.A. 2012, Annual report, Fiat S.p.A, Venaria. Meldrum, M, & McDonald, M 2007, Marketing in a nutshell: key concepts for non-specialists, Elsevier, Amsterdam. Porsche SE 2011, Annual report Short Fiscal Year 2010, Porsche Automobil Holding SE, Stuttgart. Read More