SAAB Automobiles: SWOT and PESTEL Analysis - Essay Example

SAAB Automobiles – SWOT and PESTEL analysis SAAB Automobiles has been a firm with a significant history in the global automobile industry. The firm has been in the market since 1949, when the first car of SAAB was produced (SWEDECAR 2012). SAAB has first established in 1938 and focused on the production of aircrafts and various military products. Through the years, SAAB Automobiles become independent from the SAAB Group, which is still a quite successful firm focusing in the manufacturing of military and aeronautic products. In 19 December 2011, SAAB Automobiles filled for bankruptcy, since all its efforts for supporting its operations worldwide have failed (SAAB Newsroom 2011, Business Insider 2011). The Indian firm Mahindra has declared its interest to acquire SAAB and support the re-positioning of the organization in the global industry (Kinnander 2011). Despite the challenges that the firm has to face, especially since its bankruptcy, still, there are chances for the organization’s revival, taking into consideration the current performance of the global luxury cars sector globally. For this reason, it would be necessary to evaluate the position of the firm towards its competitors. The use of SWOT analysis and the PESTEL analysis would be necessary. In the context of the SWOT analysis, the performance of the organization would be measured, using four criteria: strengths, weaknesses, opportunities and threats. The relevant analysis could be developed as follows: a) Strengths; the firm has a significant brand name; in fact, SAAB has been the key competitor in the global automotive industry; the quality of its cars has been considered as the firm’s key advantage within the global automotive industry (SWEDECAR 2012); b) Weaknesses; the competition in the global automotive industry is extremely strong; many firms have managed to develop their position in the particular industry, reducing the firm’s potential market share; for example, apart from BMW and Mercedes, the firm has to face automotive firms such as Seat and Hyundai, which do not have such history as SAAB but their brand name has become well known in markets internationally (Hoovers 2012); the design of the firm’s cars has not been changed for many years; this is a significant weakness of the organization towards its competitors, who are likely to update their design rules regularly (The Financial Express 2010); c) Opportunities; the luxury market worldwide is expanded rapidly. Despite the market’s downturn after the recession of 2009 (Eisenstein 2009), now the prospects of the particular industry are many, as revealed through the high profits of luxury cars in China and other dynamic markets worldwide (Arcega 2012, Rovnick 2012); the firm would be able to compete effectively in the particular industry if it would be able to control its financials, meaning especially to develop effective negotiations with its creditors, d) Threats; the firm’s competitors have been increased their power since the bankruptcy of the organization; the phenomenon is clear in the case of SAAB’s dealers worldwide. Due to the bankruptcy powerful competitors such as ‘Volkswagen AG, Seat and Mitsubishi Motors’ (Kinnander 2012) had the chance to develop cooperation with SAAB’s experienced dealers who have ‘a loyal clientele’ (Kinnander 2012). It would be quite difficult for the firm to keep its dealerships worldwide. Therefore, the firm’s relationship with its business partners and customers is severely threatened by the bankruptcy. The initiatives developed by the firm’s competitors, after the bankruptcy, for approaching SAAB’s dealers internationally could set severe barriers to the firm’s return in the global market, if the firm’s financial problems are resolved. At the next level, the PESTEL analysis would help to understand clearer the challenges of the organization in the context of the global market. The PESTEL analysis emphasizes on the role of six different factors on business performance: Political, Economic, Social, Technological, Environmental and Legal. The above factors would be evaluated as of their influence on business operations, as follows: a) Political; the political environment in countries worldwide is characterized by high instability. No governmental support can be expected for business initiatives, even for firms operating locally. The Swedish government did not prevent the bankruptcy of SAAB Automobiles, trying probably to save the parent firm’s image in the global market (Scandinavian Companies and Market 2011); b) Economic; the markets worldwide face continuous and severe turbulences; the price of the firm’s cars is rather high – even compared to other competitors in the luxury car market (Krebs 2010, Figure 1, Appendix, The Financial Express 2010). This fact has led to the reduction of the firm’s customer base in the past and it continues to be a barrier, in case that the firm re-enters the international market; c) Social; during the last 4 years the potentials of consumers around the world to buy luxury products has been significantly decreased due to the continuous financial turbulences; of course, there are certain markets, such as the Chinese market which still have potentials in regard to the luxury products industry (Arcega 2012); but the long term perspectives for the particular products seem to be rather negative; d) Technological; the firm has traditionally focused on the quality of its cars, a fact that has been its key advantage towards its competitors; the firm has tried to update its manufacturing processes aiming to keep its customers (Wulfers 2011, Red 2011), but this target has not be achieved, as proved by the firm’s bankruptcy in December of 2011, e) Environmental; up to its bankruptcy, the firm had successfully responded to the market demands for cars that are friendly to the environment; therefore, the specific factor has not been a factor that delayed the firm’s expansion; f) Legal; the potentials of firms which have been declared in bankruptcy to develop their market position are quite limited worldwide; in fact, in all countries the firms of such status are considered as non trustworthy, a fact that can significantly delay any effort for developing strategic alliances, so that the organizational status is restored. In accordance with the issues discussed above, the return of the firm in the global market would be quite difficult even if the firm’s current financial problems were resolved. Works Cited Arcega, Mil. “Sales of Luxury Cars Booming.” 11 January 2012. Voice of America. 13 March 2012. < http://www.voanews.com/english/news/economy-and-business/Sales-of-Luxury-Cars-Booming--137129198.html>. Business Insider. “Saab Files For Bankruptcy In Sweden.” 19 December 2011. Business Insider. 13 March 2012. < http://articles.businessinsider.com/2011-12-19/europe/30533124_1_spyker-cars-saab-automobile-sweden-s-saab>. Eisenstein, Paul. “Luxury car market may never look the same.” 28 September 2009. MSNBC. 13 March 2012. < http://www.msnbc.msn.com/id/32860931/ns/business-autos/t/luxury-car-market-may-never-look-same/#.T2AgkuXwC3E>. Hoovers. “SAAB Automobile Competitors.” 13 March 2012. . Kinnander, Ola. “Saab Dealers Driving to Maserati With Unfolding Bankruptcy: Cars.” 13 February 2012. Bloomberg. 13 March 2012. . Kinnander, Ola. “Bankrupt Saab Automobile Said to Attract Interest From India’s Mahindra.” 30 December 2011. Bloomberg. 13 March 2012. < http://www.bloomberg.com/news/2011-12-30/bankrupt-saab-automobile-said-to-attract-interest-from-india-s-mahindra.html>. Krebs, Michelle. “How To Say Suicide in Swedish: 2010 Saab 9-5 Is $50 Grand.” 28 April 2010. Auto Observer. 13 March 2012. . Red, J. “Press Release: Saab Automobile Launches New Engineering Structure.” 25 January 2011. SAABSUnited. 13 March 2012. < http://www.saabsunited.com/2011/01/saab-automobile-launches-new-engineering-structure.html>. Rovnick, Naomi. “The Road to Wealth.” 2 March 2012. TRUST. 13 March 2012. < http://www.bgtrustonline.com/articles/world/the-road-to-wealth.aspx>. SAAB Newsroom. “Saab Automobile AB Files For Voluntary Reorganization.” 7 September 2011. SAAB. 13 March 2012. . Scandinavian Companies and Market. “Muller’s struggling Saab automobile can ruin Saab Jet business with Switzerland and other markets.” 2 December 2011. Scandinavian Companies and Market. 13 March 2012. . SWEDECAR. “SAAB History.” 13 March 2012. < http://www.swedecar.com/saab_history.htm>. The Financial Express. “Volvo, Saab need new designs, price tags to beat competitors.” 24 September 2010. The Financial Express. 13 March 2012. < http://www.financialexpress.com/news/volvo-saab-need-new-designs-price-tags-to-beat-competitors/686685/>. Wulfers, Frank. “Saab Automobile Parts AB reaches an agreement with ANA Logistics.” 17 March 2011. SAAB World. 13 March 2012. . Appendix Figure 1 – The price of the firm’s cars, as compared to those of the competitors (Source: Krebs 2010). Read More