PESTEL Analysis of Jaguar Land Rover - Case Study Example

International Management - PESTEL analysis of company (Jaguar Land Rover) Contents Contents 2 PESTEL analysis 3 Political 3 Economic 4 Social 5 Technological 6 Environmental 7 Legal 8 2The current position of the organization with respect to Ethics, Corporate Social Responsibility and Corporate Governance 9 Ethics 9 Corporate Social Responsibility 11 Corporate Governance 13 References 16 1 PESTEL analysis Political Jaguar Land Rover is a multinational automobile company which operates in different countries across the world. Political situation in the different countries are significantly varying in nature. The organization has six facilities for manufacturing and assembling their products. Among those six facilities five are in United Kingdom and one is located in India. Political situations of UK and India are significantly different. In India, there is multiparty federal structure but in UK the political structure is different. As an organization the company has to go through much more formalities in India. In the case of UK the company has to go through lesser formalities. Red tape is also an important issue that the organization faces in their business operations in India. This political issue is a significant problem for the company. Like other automobile companies the organization is also facing the threat of international terrorism. Being a multinational company the organization has significant threats from the global terrorists groups. Foreign investors in the Indian market are getting significant tax benefits from the government. It has attracted lots of automobile companies to open their accounts and to expand their businesses in the Indian markets. It has increased the competition for Jaguar Land Rover. The organization has business operations in China. China is a communist nation. In that country freedom of speech is very less and so the organization has to manage their business operations according to the whims and fancies of the Chinese government. There is very less scope for the organization to voice their concern in the country. Political situations in the Asia pacific region are significantly volatile in nature. Political situations in Pakistan and Afghanistan are not all safe for the company. It is being observed that often in these two countries foreign nationalities and foreign organizations are the soft targets of the terrorists groups. Due all these volatile situations safety and security of the employees are significant concerns that the organization is currently confronting. These entire messy political situations have hampered the business profitability also. In this region the company recorded lowest volumes of sales. In 2012, Only 9161 Land Rover cars and 3815 Jaguar cars were sold in the region. Recently the organization has been acquired by Indian automobile company TATA Motors. Differentiating cultures of these two organizations is also an issue for the company. Economic Jaguar Land Rover is one of the most renowned automobile brands in the United Kingdom. The company has also opened up its operations in few international locations including North America, China, Germany and some other countries in the Asia Pacific region. Therefore, the economic developments and issues in the domestic as well as the international business environment affect the operations and profitability of the company in a major way. Economic factors like demand level, income level and purchasing power are significant factors that cause an upturn or downturn in the performance and profitability of Jaguar Land Rover. The global economic developments have created an upsurge in the demand for luxury cars which acts as a major opportunity for companies like Jaguar Land Rover that focus on the manufacture and sale of luxury vehicles. The price of fuel is another major influencing factor for the sale of automobiles. The sales of luxury vehicles are reported to be higher in countries in which the price of oil is comparatively lesser. The fluctuations in exchange rates also impacts the business of Jaguar Land Rover because the company is present in a number of locations across the world and is engaged in the export and supply of vehicles in a number of international locations through the distributors. The increasing level of income and purchasing power of consumers across the globe, especially in emerging nations like China is also seen as an opportunity for the automobile business. Therefore, the company should focus on capitalizing on its strengths and capabilities to mitigate the economic risks like currency fluctuation and oil price levels and tap in the opportunities like increasing demand of luxury automobiles, the growing income levels and spending power of consumers in the emerging markets. Social The consumer mindset towards luxury cars has changed radically in the last few years. More and more consumers are identified to have an inclination towards spending high amounts of money in the luxury segment. This is also true for the luxury automobile sector. The living standards of people in the developed as well as the developing countries have become much improved in the last few years. Also, a higher level of consciousness towards social image and status has been noticed among the consumers in the mature as well as emerging markets for automobiles. Flaunting wealth is a common trend noted among the primary consumers in the automobile sector as a result of which the sales of luxury vehicles have been increasing at an accelerated rate. The consumers are becoming more conscious towards the protection of the environment due to which the demand for environment friendly cars like the electric car models and hybrid car models have increased considerably. Jaguar Land Rover has successfully responded to this opportunity by introducing new models of hybrid cars and electric cars along with the product line of engine powered vehicles. The emission from the engine powered vehicles is a major social issue faced by all kinds of automobile companies across the globe. However, Jaguar Land Rover has continuously strived to reduce the carbon dioxide emissions and has been able to control the carbon footprints of its products to a high extent. Apart from these factors, the collaboration of Jaguar Land Rover with education groups and social groups like the Red Cross Society, the International Federation of Red Cross and Climacare are socially impactful corporate strategies. The company should focus on developing on these projects and initiatives in order to become more acceptable in the global societies and markets. Additionally, Jaguar Land Rover should participate in encouraging the procurement of components and raw materials from the local suppliers to add value to the development of the local society and participate in the process of mobilizing the key stakeholders in the global automobile segment in order to foster productivity, innovation as well as a higher level of social acceptance. Technological Technology is ever changing in the automobile industry. In this industry technology takes very little time get outdated. Currently global automobile industry is seeking for more fuel efficient technology. In the modern world automobile technology has advanced a lot and it poses significant challenges for the company. Currently the global automobile industry is trying to introduce several state of the art facilities like Intelligent Emergency Braking and Lane Keeping. All these new international ideas have made the things tougher for this UK based company. The organization has structured R&D. But still the organization is facing significant innovation problems. Several automobile companies from Europe and America are investing lots of money and energy in their research endeavours. Due to financial constraints the organization has not been able to compete with them properly. Advance “Single Physics” computer system has changed the geography of the automobile industry. This has given very high degree of precision and sophistication to the industry (Jaguar Land Rover, 2013). To manage this high degree of sophistication and precision the company is facing significant challenges. International fraternity has given considerable importance towards the weight reduction of the cars. But the company has not been able to manage this shift from heavy weight vehicle to light weight vehicle in a proper way. As far as the designing and verification is concerned the global automobile industry is shifting towards multi-physics modelling. Several automobile organizations are trying to implement this technical concept experimentally. In this context also the company is facing some serious lacking. In UK market the organization is facing significant issues related with the quality of graduate engineers. It is a not an isolated problem for the company, it is a comprehensive crisis for the whole automobile industry in UK. Environmental Reducing carbon foot print is a significant international environmental issue for the company. Waste management, water conservation and energy conservation are also significant issues for the organization. Due to its large scale business operation the organization generates lots of solid and liquid wastes. All those wastes can hamper the environmental stability of the area where they work. The organization is experiencing increasing demands of their brands globally. Due to this the company is increasing its global manufacturing capacities to meet growing demands of the cars. It has created an atmosphere where the company is generating more wastage than before. The company has an aim to reduce it 27% carbon footprint emission by 2015 (Jaguar Land Rover, 2011). It shows that the organization has significant contribution as far as the environmental pollution is concerned. Different automobile companies across the world are trying to convert their operational process more environment friendly. In this aspect also the company has started late and it has long way to go. Day by day international agencies are giving significant importance towards the environmental stewardship. Being a late starter in this aspect the organization is facing significant issues. The global automobile industry is focusing towards alternative energy vehicles. Organizations across the world are taking galloping steps towards this idea. As far as the environmental factors are concerned it is a big challenge that the organization is currently facing. Customers are becoming more and more environment concerned. They are seeking for alternative energy with less CO2 emission. This pressure from the customer has made the thing more difficult for the company. Over the years different nongovernmental organizations and social organizations across the world have raised their voice and protested against the environmental degradation; all these are making the work tougher for Jaguar Land Rover. Legal Regulations and laws vary from countries to countries. The organization has to manage adjustments in their business process according to the laws of the land. Recently European Union has come up with new directives. All the new directives have made legal situation tougher for the company. In different countries legality related with employees safety and compensation are significantly varying in nature. Minimum wages levels of the employees vary from one to another country. It has created significant difficulties for the company. Replication of the automobile model is also a matter of concern for the company. Due to the advancement of the modern technology replicating or copying automobile design has become a prominent issue in the automobile industry. In the case of Jaguar Land Rover the scenario is same. So, the company faces serious issues related with patent and copyrights. It has become a significant challenge for the UK based automobile manufacturer to protect their innovative designs from the other players in the market. The organization is finding it very difficult to stop illegal infringement of the other brands. In America and India the organization has to abide by wide range of legalities at various levels. It has to abide by state law as well as the federal laws. In some cases state laws are different from the laws of the central government. It is an unavoidable issue that the company often faces in US and India. Due to this the company faces significant difficulties to fine tune their legality of the business operations in a common fabric. 2 The current position of the organization with respect to Ethics, Corporate Social Responsibility and Corporate Governance Over years, the manufacture and sale of high quality automobiles has become a part of the existence of the brand of Jaguar Land Rover instead of being the core objective of the business. Apart from conducting the business in a profitable manner, the company has started focusing on sustainability related practices like the maintenance of ethics, corporate social responsibility activities and effective corporate governance. In light of the changing requirements of the global business environment, Jaguar Land Rover has remarkably adapted itself through the introduction of the innovative practices that have helped the business to create a strong position in the global automobile industry with respect to the international requirements and norms related to ethics, corporate governance and corporate social responsibility. Ethics Jaguar Land Rover plays an active role in each of the communities in which it conducts its business. The company has built up its goodwill as well as its responsible image in every community that it serves through the continuous commitment of assuming a significant role in adding value to the local and global societies and communities. The company has been a part of many charitable initiatives, has continuously addressed environmental commencers and has partnered with colleges and schools in order to improve the living standards, education level and the overall societal condition of each of the locations in which it operates. Jaguar Land Rover has developed a Code of Conduct related to ethics which is strictly complied with in all its business locations. The employees of the company are expected to have a clear understanding of the ethical guidelines as defined in this Code of Conduct. The Code of Conduct is prepared on the basis of the existing local and international laws related to anti-bribery, gifts and entertainment. The anti-bribery policies are developed on the basis of the United Kingdom Bribery Act of 2007. Every year, the company asks every employee to certify that he or she is aware of the ethical terms and policies of the company and that he or she has gained a proper understanding of how to comply with the existing Code of Conduct of the business (Damian and Cohen, 2004). The employees are given the responsibility of immediately reporting any action or activity that may be in violation to the Code of Conduct. Also, the management of the organization ensures that no reprisals would be carried out against the employees who report unethical practices in good faith, in case the violation is not proved or in case the employees are unsure about whether the violations have been done or not. The management of Jaguar Land Rover has developed an open door policy in which the individual concerns can directly report their concerns to the line managers, human resource departments or compliance departments through a confidential helpline, incident reporting form present in the intranet or through the web based helpline that is introduced in the company from April 2012 and is managed through a third party ethical issues reporting team. In case any complaints are received regarding ethical violation in any of the locations of the business, the company immediately investigates the reports and if any of the employees, suppliers or other related business entities are found to be conducting any unethical activity or acting in breach of the Code of Conduct, then that entity is subjected to strict disciplinary actions which may include dismissal in the extreme cases of violation. After the introduction of the third party management for managing the unethical incident reporting in 2012, the company received a total of 35 whistle blowing complaints which were thoroughly investigated and resolved. A similar process of resolving issues related to unethical practices is used in Jaguar Land Rover till date. Health and safety management of the employees and the customers is another important ethical perspective focused on by the company. Every employee in Jaguar Land Rover is obligated to comply with the Health and Safety policies of the company irrespective of the level and position of employment. Also, all the workers are expected to focus on health and safety management and the managers are expected to oversee and manage the implementation of these policies in every department. Corporate Social Responsibility Corporate Social Responsibility is a type of corporate self-regulation that the modern day companies integrate into their business models with the aim of attaining sustainability and competitive advantage. The corporate social responsibility policies function as self-regulatory processes through which businesses can ensure and monitor the compliance of its activities with the required ethical standards, legal procedures and international rules and regulations. In some business models of multinational companies, the implementation of corporate social responsibility involves both the compliance and actions that lead to some kind of social good. This is aimed at looking beyond the interests and compliance necessities of the company and embracing added responsibilities in order to create a positive impact on the stakeholder groups of the company as well as on the environment. All the stakeholder groups of a company including the employees, consumers, communities, investors and government are considered in the process of corporate social responsibly of the locally as well as internationally operating companies (McWilliams and Siegel, 2001). Jaguar Land Rover is a company that is hugely acclaimed for its corporate social responsibility initiatives. The company is highly committed towards reducing its environmental impacts and conducting the business in a sustainable and responsible manner. Jaguar Land Rover takes up a 360o mechanism of ensuring sustainability through the development of a Sustainability Development Policy that is used to guide the operations of the company in all the international locations. The organization has integrated sustainability and responsibility in every phase of its operations and continues to implement responsible activities in every stage of the product life cycles. The corporation has introduced its Environmental Innovation strategy in the year 2009 as a part of the business initiatives to reduce the impact of its products and product manufacturing processes on the external environment and communities. The company uses a ‘whole life’ planning mechanism in its manufacturing facilities across the world which helps to decrease the manufacturing as well as the tailpipe levels of carbon dioxide emissions in every stage of the product development phase staring from the design of the product to the procurement of raw materials, production of auto components, transport of components to the individual factories and production houses, manufacturing of the parts, transportation of the assembled products to the customers, use of the products and the management of the product at the end of its usable life. Since 2007, the automobile giant has reduced its operational carbon dioxide emission by 21%. From 2007-2011, the company has achieved a 75% decrease in waste of landfill for each of the manufactured vehicles, reduced the tailpipe carbon dioxide emissions from the vehicles by 22% and reduced the use of water by 17% for each of the products manufactured in the standalone production units. Jaguar Land Rover is the only automobile manufacturing company in the United Kingdom which has achieved the Platinum Big Tick in Business in the Community (BITC) Corporate Responsibility Index in 2013. Also, the company has been awarded with many prestigious awards related to Corporate Social Responsibility activities like the Responsible Business of the Year 2013 which is given by BITC. The corporation also focuses on encouraging the talented young generation of people through the introduction of education schemes and training programs. These schemes and programs have supported the development of new generations of technologists and engineers. This corporate social responsibility process of Jaguar Land Rover not only helps to improve the economic conditions in the regions in which it functions but also ensures the development of new generations of engineers who are equipped to become the future generation of employees of the company and add to the sustainability of the company as well. The company maintains a well-managed proportion of educational commitments and environmental responsibilities in its Corporate Social Responsibility practices. The Environmental Innovation Initiative is one important step taken by Jaguar in 2013 which plans to extend the achievements of the company regarding the reduction of the environmental effects and the positive contribution to the society through the investments made in the local and global initiatives. Globally, Jaguar Land Rover is actively involved in more than 60 sustainable development schemes and projects. The company has also developed targets to monitor and measure the performances and progress of its businesses in the United Kingdom as well as in other international locations with respect to the achievements of the Global Corporate Social Responsibility Vision developed for the year 2020. Corporate Governance Jaguar is a company managed by a board of directors which includes one executive director, two independent executive directors and two non independent executive directors. The responsibilities and roles of all the directors are clearly differentiated. Also, the roles of the Chief Executive Officer and the Chairman are also designed in a suitable manner with appropriate level of power and responsibility being delegated to each of them. The board provides guidance and leadership for the effective management of the business, particularly in relation to corporate governance, growth plans, business strategies, consideration of opportunities and risks, mitigation of risks, business expansion, demand fulfilment, product launches and capital expenditure necessities. Jaguar Land Rover has always been renowned for its corporate governance policies. The automobile company has taken up strategic approaches to ensure adequate ethical practices and corporate decisions in the business over the years of its existence. The corporate governance structure followed in the organization is largely based on sustainability, responsibility and compliance. The strategies and visions of the business are developed in such a way that they ultimately support the business objectives and goals and also create value for all the stakeholder groups. Sustainability and compliance are strategically integrated into the corporate governance structure of Jaguar. The corporate governance structure of Jaguar is based on enterprise governance and has played a major role in helping the company to achieve the current prestigious and financially profitable position. The corporate governance structure of the company has undergone a major restructuring under the guidance of the CEO of Jaguar Land Rover, David Smith who has introduced a new corporate governance framework which includes environmental innovation as one of the three main strategic pillars of the business. According to this enterprise governance framework, the board of directors are ultimately responsible for implementing the sustainable development policies. A board level sustainability department was formed in the beginning of 2008 to increase the focus of the company and all its employees on the sustainability initiatives. This forum is known as the Sustainability Action Group which consists of the senior managers of the company across all locations and looks after all the different areas including product design and development, manufacturing, financial management, human resource management and communication development. The target setting, performance measurement and goal achievement activities are managed, monitored and reviewed by the Action Group so that appropriate corporate and business decisions can be taken based on this kind of management. The risks and opportunities associated with the future trends of the business are also identified by this Action Group which helps the board of directors to decide on the future activities and execute the activities through the work streams of the business with suitable metrics set up to measure the performances against the commitments and vision of Jaguar (Carroll, 2012). References Carroll, A. B. 2012. The Four Faces of Corporate Citizenship. New Jersey: McGraw-Hill. Damian, G. & Cohen, S. 2004. Business Ethics: Problems and Cases. London: Oxford University Press. Jaguar Land Rover. 2011. Our plan our sustainability. [Pdf]. http://www.landroverhk.com/images/downloads/pdf/sustainability-report-2011-2012.pdf. [Accessed on 20th October 2014]. Jaguar Land Rover. 2013. Annual report. [Pdf]. http://www.jaguarlandrover.com/media/14149/jaguar_land_rover_automotive_plc_annual_report_2012-2013.pdf. [Accessed on 20th October 2014]. McWilliams, A. & Siegel, D. 2001. Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26(1), pp.117–127. Read More