Business and Strategic Management of Lamborghini - Case Study Example

BUSINESS AND STRATEGIC MANAGEMENT - LAMBORGHINI Executive summary In the current global economic climate, growing rivalry among the organizations, forces of globalization, rapid changes in business practices fueled by innovations in technology has increased the necessity of companies to tune up their strengths according to the opportunities that unfold in the market. It is essential for business organizations to develope their internal environment to remain focused and to exploit the opportunities that unravel in the changing business environment. "An environment analysis is to be undertaken with the objective to develop a finite list of opportunities, threats, strengths and weaknesses. Here the word finite list is emphasized because the job of the manager is not to make an exhaustive list of all the factors that may affect the organization. But focus should be on key environmental variables that could influence business"1. As mentioned above, understanding of the internal and external environment of the business is very crucial for the basic function of planning to take place in an organization. An awareness of one's self and the surrounding environment is the first step in the long journey of survival and success for an organization. After the analysis of the environment, both internal and external, planning is the next activity which involves the future of the entity. The analysis of the present and to be prepared for the future is the essence of planning. Hence, understanding the environment and the relevance on its competitive business strategy is vital for the organization to grow and to create value for the stakeholders. Next, to tackle all the challenges for a company, a good business strategy should be supported by the commitment for implementation and good control mechanism. In creating the strategy and the performance climate the business manager uses facts, reasonable premises it has to take advantage of the opportunities to steer ahead of the competition. Hence, an understanding of the concepts of strategic management can help in developing core competencies by the adopting appropriate strategy and to develop the essential resources. Introduction to the company Started with the passion to create great automobiles, the Automobili Lamborghini SpA, have come a long way with a rich history. The founder of the company Mr. Ferruccio Lamborghini first started with a tractor assembling unit after the World war II from the army vehicles left behind by the Allied Forces. The popular story tells that Lamborghini wanted to create a car that is in no way inferior to the Ferrari and much better than the Ferrari. But company sources say this story may not be the real reason but Mr. Lamborghini felt that there was a great opportunity in the market for well finished luxury cars. After the success of the tractor business, he wanted to enter into the luxury cars segment, because there was still gap in the market left by the Ferrari. Hence, he formed a team of engineers and developed his own V12 engines and developed his own brand. This again became very popular and profitable. But in the 1970s the company became bankrupt and the owner ship changed into than hands to Mimran brothers. After more than two decades of a series of changes in the ownership, the company now belongs to the Audi group which again is a subsidiary of the automobile giant Volkswagen group. The vast technical resources of the Audi group have been very beneficial to the Lamborghini group to develop successful models such as the modern Spyder. With the rich tradition and reputation for building high quality and sophisticated cars, the Automobili Lamborghini continues to be a huge hit in the market. In this backgorund, the following essay attempts to understand the relevance of the mission, vision and the corporate strategy of one of the world's renowned brand of cars the Lamborghini. By understanding the background materials for the preparation of this essay, it has become possible to understand the interdependency of the three elements of strategic management, i.e., business environment, strategy and realization of the objectives. Mission of the company Although the motive was to cater to the needs of the premium segment as there was a demand for high end luxurious cars after the world war II, the innate motive for creating the car by its founder was to prove that they could do whatever Ferrari could do, and much better. Hence, the company when it was formed by Mr. Lamborghini was started with the only mission , i.e., "To outperform Ferraris". But later after the change in ownership and the constitution of the company, the strategic focus of the company has become different. A reference into the sources of the Lamborghini company does not show any specific mission and visions statements, but a study of the Audi group, which is the owner of the Lamborghini brands, show that the mission of the company is, "Audi is a manufacturer of exquisite cars - beautiful, sophisticated machines that embody technological perfection. Our success is built on our core values of creativity, commitment and enthusiasm, and keeping our customers' desires at the heart of everything we do. We strive to lead the way through constant innovation, setting new standards that define Vorsprung durch Technik." If we analyze the above mission statement we can understand that the groups' main focus is to satisfy the desires of the customer. The basic motive of the company is not to satisfy a want of the customer, but a desire. We know that the desire is something that is longed for. The desire to own a very highly sophisticated car like a Lamborghini also defines the kind of customer group that is being focused. It is common knowledge that a mission statement is a declaration of attitude of an organization. According to George (1979), "Mission statements are designed to provide motivation, general direction, an image, a tone and a philosophy to guide the enterprise". In this case of Lamborghini, the company's mission statement shows that the company can draw the tone and philosophy by expressing itself that the core values are creativity and innovation. The mission statement of the company helps us to define the corporate strategy by clarifying who are the firm's customers, where does the company compete, what is the company's' distinctive competence and the basic values and ethics of the company. King and Cleland state that "to specify organizational purposes and then to translate these purposes into objectives in such a way that cost, time and performance parameters can be assessed and controlled". Hence, by the statement of who we are and why we are in the business we can have a clear understanding of the environment around us and eventually, this helps in developing the future course of action which is often called as the strategy. The objectives and the strategy of Lamborghini in relevance to the mission statement is to be analyzed and understood in the coming paragraphs. Environmental analysis Internal environment at Audi company can be analyzed from the secondary information gathered and some of the major strengths can be explained as follows: a) Focus on research and development: The company has entered into strategic partnerships with major universities such as the Technical University of Munich. Management of R & D function requires strategic and operational partnerships between R & D institutions and the business functions. The company's partnerships with the research institutions have helped it to develop better technologies which are useful for developing environmentally friendly vehicles. b) Priority for the human resource: The company's philosophy is to attract and retain the best talent in the automobile industry. The human resource is highly valued and human resource management is included largely in the corporate strategy. The company has various polices with regard to industrial safety and reduction f industrial accidents. The management has entered into agreements with the labor force to implement safety standards in the factories and this policy is also applicable to all it production operations and also to it's the members of the value chain. Another notable aspect of the management's care for the employees is the profit sharing programme of the company which is directly related to the operating profits. The company also encourages positive ideas and innovation from the employees though the awards program. The ideas and innovations from the employees are implemented and the company rates the suggestions based on the savings created. All the employees in the company are provided with free medical checkups and the company is very much aware of the demographic constitution of its human resource. This knowledge helps the company to formulate its human resource development programs. Another major policy that has to be mentioned here is that, Audi provides maternity and healthcare for the employees so that they can still be in service during their maternity or when the employees want to advance their educational qualifications. The employees can stay in service for up to 7 years in this way. c) Strategic location of the production facilities: The company has increased its production capacity with the inclusion of new production facilities in various countries such as Hungary, India, Belgium. This increased production and distribution facility helps in reliable assemblies and subassemblies, effective inventory control and maintaining high standards of quality control. This also helps in introduction of new technologies which are specific to individual models. d) Dealer qualification: the company holds specific dealer qualification programs where by the business of the dealer is evaluated and specific development programs are introduced. This program helps in better economic efficiency, customer satisfaction and improvement in the quality of the service provided to the customer. e) Sales and revenue: the sales and revenue of the company is at considerable high levels in major markets such as USA and China. Though there is impact due to the global economic slump, still the company manages to be in the number one position in the premium cars segment. Macro environment 1. Global recession: the economic recession across the world and especially in USA and in Europe can be major setback to the company. The company can expect slowdown in the orders. The recession in the US economy will directly affect the sales in North America and will indirectly have impact on emerging economies like India and China. 2. Fluctuations in the exchange rate: The fluctuations of the exchange rate and the pressure on local currencies with respect to the American dollar can have impact on the sales of the cars in the Asian economies. But since, Lamborghini is sold to the premium segment of the market, the impact of the exchange fluctuations will not be a significant factor in the consumer purchase decision. 3. Focus on technology: the company has to focus more on the technology innovations in this production processes and its end products. Technology innovations and cutting edge technologies in the cars will play significant role in increasing the sales revenues and achievement of sales targets. In general it is predicted that the car industry will experience a dampened climate during the coming years due to the economic downturn in US and major European economies and Asian economies also are not going to be able to achieve the expected growth rates as predicted. Hence, the company has to be prepared to handle this challenging business environment trough development of its core competency. Objectives and corporate strategy of the company In relevance to the mission of the company, the major objective of the company is that to establish the Audi core brand as the world's most attractive premium brand by the year 2015. The company wishes to achieve this objective through the development of major marketing and corporate strategies. In the official website of the company it is quoted that the focus of the company is first on increasing the volume of sales. For achieving the target of 1.5 million vehicles in 2015, the company intends to strengthen its distribution and service network in major economies such as USA, Russia, India and China. The company has recently appointed a highly talented team for developing its business in the emerging economies such as India and China. The next strategy is to emphasize on acknowledging the customers' high expectations. The rich tradition of the Automoboli Lamborghini and the parent company Audi has contributed to the high expectations from the customer. The consistent quality of the cars has created a high brand loyalty and image for the product. Drawing the concept from the mission statement it can be understood that the major strategy of the product to satisfy the expectations of the customers is to realize their desire and incorporate the values into the vehicles manufactured. Accordingly the company has incorporated more emphasis in manufacturing cars that are environmentally friendly. The company proposes to introduce the new technology in the production process which allows the driver to select individually variable setting of the vehicle components. This allows the vehicle to be built according to the personal preferences of the customers. Another aspect that has to be mentioned here which drives the company more in line with the global trends is that, the company has formed its environmental mission statement. The Audi company has introduced emission control and pollution control measures in all it production plants and its logistics systems. To summarize, the objectives and the corporate strategy of Audi group in general and Lamborghini in particular are streamlined according to the general trends in the automobile industry and changing preferences of the customers. The success of a strategy is guaranteed only of the management is aware of the strengths and weakness of the company. In this case the management has rightly focused on the strengths of the company such as the rich experience in developing advanced driving pleasure for the drivers. When core competency is focused and if the strategy is built upon the same, it is difficult for the competitors to copy and it becomes costly to imitate. The Audi group is at a greater advantage in this aspect. According to Pearce, "the mission statement is effective when it can address to the customers, products/ services, markets, technology, concern for survival, growth and profitability, philosophy, self-concept, concern for public image and concern for employees". An overall analysis shows that the company mission, objectives and strategy are interrelated and complimentary to each other and are addressing to the concerns of the stakeholders of the company. Conclusion The company is in a comfortable position in the market because of the strong brand image. The strong market position has resulted in a very low threat of substitutes. The image of Lamborghini cars has made the bargaining power of the company very high. The strong product features combined with the effective marketing strategy has made the consumers turn their focus away from the price tag. The strong market position has benefitted by consolidating its supply chain which is very essential in achieving customer satisfaction. It is obvious that in any given business environment, the customer is the primary force. The preferences of the customer decide the position of the company in the industry. If the customer likes a product/ service, then the company starts to grow and its relative strengths also tend to increase and the company strives to serve the customer better and this becomes a cycle. In case of Lamborghini cars, the same logic holds good. The quality of the car speaks high about the company which is obvious in its financial results. In future the company has to focus on its strength of design and performance to have success in the coming years as well. References 1. David R. Fred, Strategic management - Concepts and Cases, Prentice Hall, New Jersey, 2007 2. Steneiner , G, Strategic Planning: What Every Manager Must Know, the Free Press, New York, 1979 3. King, W. R and Cleland, D. I Strategic Planning and Policy, Van Nostrand Reinhold, New York, 1979 4. Pearce, J II The company mission as a strategic tool, Sloan Management Review 23, No 3 ( Spring 1982): 74 5. Audi Worldwide 2009, viewed March 8, 2009, http://www.audi.com/com/brand/en.html Read More