Jaguar: Strategic and External Environment Analysis - Case Study Example

Jaguar: Strategic and External Environment Analysis Name: Lecturer: Course: Date: Jaguar Strategic Analysis Introduction India-based Tata Group became the parent company of Jaguar Land Rover (JLR) after it acquiring it in 2008. By operating in the UK market, Tata has set particular ambitions and goals for its Jaguar Land Rover (or just Jaguar) subsidiary. Jaguar is distinguished for producing some of the most beautiful premium luxury cars in the world (Vizard 2014). Tata needs to decide the kind of strategies to be adopted that would enable its jaguar subsidiary to increase profitability and to survive. Jaguar therefore needs to take into consideration the macro-environment elements in the UK automobile industry such as political, demographical, socio-cultural, environmental, geographical, and economic factors. This paper examines the strategy and methods used by the business to grow. It also explores the PESTLE factors that are shaping the external environment in which Jaguar operates. Strategy and methods used by Jaguar to grow The company depends on quality leadership rather than cost leadership through production of premium luxury vehicles that are regarded as highly efficient. It is difficult for the company to engage in cost leadership because it does not benefit from economies of scale. Jaguar has created a quality culture that is identified in the company and the global car market. The company uses differential strategy by manufacturing high quality cars that set themselves apart from competitors’ cars such as BMW in order to position its products in the competitive car market. Jaguar has therefore centred on improving design and quality, making its products range to appeal to a wide consumer market (Vizard 2014). For instance, features of cars found in British made Jaguar are not found in German made BMW cars. Indeed, it is because of this strategy that the company witnessed a record car sale of 425,006 in 2013 across its major markets such as Europe, China and North America. In the United Kingdom, the number of cars sold rose by 14 percent. The increased sales are attributed to the continued strong demand for Jaguar Land Rover vehicles due to perception of customers on their high quality (Vizard 2014). Jaguar also engages in marketing by targeting customer segments who want safe, reliable and quality premium cars for status. This strategy enabled the company’s Land Rover brand to record the highest sales last year, reaching 350,000 vehicles and accounting for some 80 percent of the total car sales. The Jaguar brand sold some 76,500 vehicles (Vizard 2014). Jaguar also uses market orientation strategy where it treats customer as ‘kings.’ In particular, the company uses global brand identity and reputation to appeal to customers. The decision to use this strategy was based on a recent company survey that found that people perceive the Jaguar Land Rover and the Jaguar and Land Rover as being a symbol of ‘image’. The study also found that the company is not marching these customer expectations to its vehicles as it had failed to create a consistent brand that identifies with the status image that customers want (Vizard 2014). This implies that in addition to producing quality cars, the company has to set high prices for its cars. PESTEL Analysis Jaguar’s effectiveness and performance in the UK will depend significantly on the efficient management of the challenges, risks and opportunities presented by variations in it external market (Tan et al. 2012). Political UK’s political environment is stable and organised. The only problem the company faces is the high tax rates in the UK, which make it expensive to procure raw materials for car production hence raising the cost of production. Policies on labour contract such as the decision by the government to set minimum wages in order to avoid worker exploitation make the UK workforce to be rather expensive. This raises cost of production of automobiles (Barker 2002). The UK government also offers assistance to UK car manufacturers in terms of funding. For instance, during the 2007-2009 Economic Recession, the government initiated the Automotive Assistance Programme (AAP) to support the industry through funding. Jaguar Land Rover (JLR), which was affected by the financial crisis at the time, sought the assistance of the government to act as a guarantor to underwrite a loan worth £340 million from the European Investment Bank (House of Commons 2009). The high level of political stability in emerging markets such as India and China provides vibrant markets for the cars. Economic factors The slow economic growth of the UK economy since the 2009 Global Recession has been characterised by high interest rates and unemployment rates. This is further complicated by the high GDP fluctuations in EU countries since the Recession (House of Commons 2009). This means that there is a decline in the purchasing power of the consumers for premium luxury cars such as Jaguar. The volatility of Euro to British pounds rates has also increased uncertainty in investments by foreign firms thus creating entry barriers for more firms. The volatility of crude oil price and high price of fuel has meant that more people resort to public transport or go for hybrid and fuel-efficient cars rather than use luxury Jaguar premium cars associated with high fuel consumption. Social factors The growing consumer awareness and assertiveness because of internet technology means that consumers are more aware of what they look for in quality products (Tan et al. 2012). For instance, the internet makes it easy to read and make reviews on Jaguar’s products, which means that the company has to produce cars that are in line with the customer demands. The change in customer attitudes towards ‘saving’ than ‘spending’ means that many people are today willing to spend on premium luxury cars. Increased focus on corporate social responsibility implies that more customers would want to see Jaguar engage in social responsibility programs if the company has to be trusted. Technological factors Rapid technological development has opened up opportunities for UK firms to engage in e-commerce and social marketing. The growth of the internet and its extensive use in the UK implies that Jaguar has to integrate internet-enabled technology in selling and marketing its cars as well as to reach out to consumers in the remotest regions (Collins 2010). The emergence of the concept of driver-less care and increasing demand for ‘green technologies’ in the United States and European nations, which form a greater proportion of Jaguar’s customer base, implies that the company has to invest substantially in research and development to promote innovativeness and to keep up with the rapid technological trends (Tan et al. 2012). Legal factors The UK laws and trading policies encourage foreign direct investments. This creates room for Tata, which acquired Jaguar, to make more acquisitions in order to consolidate itself in the UK. Additionally, UK health and safety laws are recognised to be among the most structured in promoting better work conditions and employee welfare. This implies that Tata, which is headquartered in India where the legal environmental is unstable, has to take a keen interest in enforcing the laws in its UK-based Jaguar subsidiary. Environmental The UK automobile industry is characterised by increased levels of consumer interest towards ‘green’ products. Indeed, more people in the UK are going for hybrid cars because of their minimal direct environmental effects. There is also a lot of pressure for UK manufacturers to follow EU directives on climate change by complying with set emission standards by cutting down on green house gas emission. Already, Tata Group, which owns Jaguar’ has come up with guidelines to help its subsidiaries to engage in sustainable production. The pressures and enforcement of new laws regarding carbon dioxide emission means that Jaguar has to come up with better car designs that have minimal green house gas emissions. Indeed, this has been linked to the conditions the government set for loans in its Automotive Assistance Programme (AAP), where only firms with low carbon-related projects are guaranteed for loans (House of Commons 2009). In order to get the loan, Jaguar had to commit to producing low carbon vehicles. Conclusion Jaguar has to engage in quality differentiation rather than cost leadership since it has no economies of scale. This is also because its cars are associated with quality and social status. Currently, Jaguar engages in marketing by targeting customer segments who want safe, reliable and quality premium cars for status. Jaguar needs to concentrate on product development through research and design to compete against other luxury cars makers such as BMW. The company should also centre on improving design and quality to make its products range more appealing to a wider consumer market. From the PESTLE analysis, it is concluded that the UK has a formidable political motivation for globalisation. Additionally, there is a strong tax incentive for inbound investment. However, high interest rates and rising unemployment levels in the UK complicated further by the high GDP fluctuations in EU countries since the 2009 Greet Recession means that there is a decline in the purchasing power of the consumers for premium luxury cars such as Jaguar. The growing consumer awareness and assertiveness because of internet technology means that consumers are more aware of what they look for in quality products. The pressures and enforcement of new laws regarding carbon dioxide also emission means that Jaguar has to come up with better car designs that have minimal greenhouse gas emissions. References Barker, L 2002, “The Motor Industry: 2002 Market Review,” KeyNote, viewed 13 July 2014, http://www.just-auto.com/store/samples/48177.pdf Collins, R 2010, A Graphical method of Exploring Business Environment, viewed 13 July 2014, http://users.ox.ac.uk/~kell0956/docs/PESTLEWeb.pdf House of Commons 2009, “The Automotive Industry in the UK,” Ninth Report of Session 2008–09, viewed 13 July 2014, http://www.publications.parliament.uk/pa/cm200809/cmselect/cmberr/550/550.pdf Tan, J, Chuam W, Chowm C, Chongm M & Chewm B 2012, "PESTLE Analysis on Toyota Hybrid Vehicles," IC-TMT 2012, viewed 13 July 2014, http://ic-tmt.utem.edu.my/index2.php?option=com_docman&task=doc_view&gid=25&Itemid=31 Vizard, S 2014, Jaguar Land Rover looks to cement brand positioning after record sales," Marketing Week, viewed 13 July 2014, http://www.marketingweek.co.uk/sectors/automotive/jaguar-land-rover-looks-to-cement-brand-positioning-after-record-sales/4009082.article Read More