The UK Car Manufacturing Industry, JLR Brand - Case Study Example

RUNNING HEAD: The International Business of JLR Since 2007 Name Institution Course Date Contents Contents 2 Introduction 3 Background of the U.K Car Manufacturing Industry 3 Reasons for the Success of JLR Since 2008 4 How Foreign Markets Have Added Value to the Sales of JLR 5 Cultural and Ethical Issues Arising from Overseas Production 6 Issues Arising from Over-Reliance of Foreign Markets 7 Conclusion 7 References 8 Introduction The history of the UK car manufacturing industry dates back to the early 19th century. The British vehicles produced at this time relied a lot on the innovations made by countries such as France and Germany. However, as time progressed the British were able to manufacture vehicles relying solely on local knowledge and innovations (Great Britain: Parliament: House of Commons: Trade and Industry Committee, 2007, p. 40). This paper is aimed at investigating the JLR brand including the drawbacks and successes it has achieved since 2007. Background of the U.K Car Manufacturing Industry Car makers from different parts of the world set up production plants in the U.K. Nissan set up a production plant in the U.K. Other car makers such as Toyota, Peugeot and Honda followed suit (Amin, 2007, p. 69). The U.K car industry is famed for sports and premium cars. These include vehicles such as the jaguar, land rover, Rolls-Royce, Morgan, Lotus among others. The U.K motor vehicle industry has been experiencing positive growth since its inception. The sector has been able to export most of its produce and the locals also make up for a big percentage of the buyers of the vehicles manufactured in the U.K. In 2008 the sector had a turnover of $52.5 billion and had generated $26.6 billion in exports. In the same year the sector produced 203,000 commercial vehicles and 1.45 million passenger vehicles. The U.K motor vehicle has experienced steady growth and has been competitive since its inception. However, in recent years the industry has experienced a number of drawbacks that have contributed to its decline. The industry was the second largest in the world in the 1950’s. It came second after the United States motor industry. This has however changed in the recent past. In the last two decades the U.K car industry has experienced lower growth especially in terms of sales as compared to its competitors such a Germany, France and Japan. This has been due to the fact that in these two decades many British cars have been acquired by foreign companies. For example, Rolls-Royce sold its rights to BMW for $65 million. Another factor that makes the U.K motor industry to decline is the fact that the rights to dormant Marques such as Riley, Rover, Triumph and Austin are owned by foreign companies. A number of car manufacturers have also halted or completely stopped production. The ford car assembly ceased operations in its plant in Dagenham. Jaguar also closed its Brown Lane Plant in Coventry as a result of losses. Reasons for the Success of JLR Since 2008 The JLR brand is one that has been successful in the U.K and all over the world (Dicken, 2015, p. 92). There are a number of factors that have contributed to the success of the JLR brand internationally especially since 2008. The fact that JLR majors in the production of the most luxurious cars in the world has contributed to its success. The company is involved in the production of luxurious vehicles such as convertibles, sedans and range rovers. These are vehicles which are preferred by the rich in the society. This is because these vehicles provide the class and comfort required by these millionaires. The company thus understands its customer base and concentrates on manufacturing vehicles that suit this class of customers. The JLR Company manufactures few vehicles which fetch high prices in the markets. China for example constitutes a large market base for these vehicles. The brand image of the vehicles produced by JLR also account for why the company has gained international success. The defender vehicle which is among the vehicles manufactured by JLR is one of the strongest vehicles in the world. The vehicle also has the highest longevity as compared to other vehicles in the world. This fact has made the vehicle to become a preferred brand in the world thus increasing its sales as more people in the world purchase it. The vehicle is especially preferred in countries where the roads and terrain are not smooth. The JLR brand was acquired by Tata Motors which is an Indian company from Ford. JLR was performing poorly under the management of Ford (Ireland, Hoskisson, & Hitt, 2008, p. 33). As a result Ford had to sell JLR at a much lower price than what they had incurred when acquiring it a number of years before. Many financial analysts had thought that Tata had committed its worst mistake. However, Tata was able to do what most people had thought was impossible. They were able to run the JLR brand effectively and were able to attain profits. One of the factors that made this possible was the fact that Tata continued the operations of JLR in the U.K. Although Tata is based in India the company left the executives to run the company from England. The company was also able to benefit from proceeds of projects that had been initiated by Ford. These projects include the BBC show by the name Top Gear, the Chinese nouveau riche and Époque. The fact that Tata introduced more models to the JLR class was also a factor that enabled it to succeed. How Foreign Markets Have Added Value to the Sales of JLR The JLR brand has been very beneficial to the Tata Motors that own it. The Jaguar, Land Rover brands have accounted for 43% of the annual income mad by Tata Motors form the sale of motor vehicles (Mikler, 2013, p. 33). The annual rate of sales for JLR has grown at a compound interest rate of 40% over the years. This has been made possible by the contribution of growing economies of the world such as China and India. The JLR brand has demonstrated success in trading with countries such as china despite being a British based brand. China has contributed to the increase in the sales of the JLR brand as a result of the increased demand for these vehicles in china. The 1.4 million millionaires in china who compose the middle class population in china prefer to drive the JLR vehicles. This is because as mentioned earlier these vehicles provide a sense class and luxury that this part of the population desire. In 2012 the sales of the JLR brand in China grew by over 71%. This percentage represented 72,000 vehicles. By the end of 2013 this number had risen to 90,000 vehicles in sales in China alone. In fact, research has shown that China has continuously been the single largest customer of the JLR brand. The success story for JLR has been the same in India. The Indians promote local by buying a brand that is owned by Tata which is an Indian company. On the other hand the JLR vehicles are big, strong and have high longevity. As a result they are preferred in India because the roads in India are not so smooth and the terrain in most areas is not favourable for small vehicles (Healy & Palepu, 2012, p. 102). Cultural and Ethical Issues Arising from Overseas Production Many companies engage in overseas production of their products in an attempt to reduce their costs of operation. This is because basing operations in a different country may be effective because resources may be cheaper in the other country. However, this practice may result in a number of cultural and ethical issues. Among the cultural issues that may emerge is the difference in the attitudes and values towards the manner in which operations are conducted. Differences in religion practices may also affect operations of a country in a foreign land. This may be manifested in cases where workers may go to their places of worship in days when they are expected to work. The ethical issue that may arise is a situation where the country in which the production is done is the engagement of child labour in the process of manufacturing. This is a practice that may not be acceptable in the host country (Beer, 2010, p. 69). Issues Arising from Over-Reliance of Foreign Markets There is a high risk in over-reliance on foreign markets for sales. This is because foreign markets may provide a high market base but it is not an assured one. This is because a number of policies may be formulated by governments of these countries to restrict the sale of the products in such countries (Czinkota, 2010, p. 43). Conclusion In conclusion, the JLR brand has been a successful one in the U.K especially after 2008. Better management of the brand by Tata Motors played a major role in ensuring its success. However, it is not safe that the brand relies on foreign markets for most of its sales. The fact that most of its sales are achieved in China is a threat especially if China imposes a quota system that will limit the amount of its imports. References Amin, A, 2007, Towards a New Map of Automobile Manufacturing in Europe, Springer Science & Business Media, Berlin. Beer, L, 2010, A Strategic and Tactical Approach to Global Business Ethics, Business Expert Press, New York City. Czinkota, M, 2010, Readings in global marketing, Dryden Press, San Diego. Dicken, P, 2015, Global Shift: Mapping the Changing Contours of the World Economy, Guilford Publications, New York City. Great Britain: Parliament: House of Commons: Trade and Industry Committee,(2007, Success and Failure in the UK Car Manufacturing Industry, The Stationery Office, London . Healy, P, & Palepu, K, 2012, Business Analysis Valuation: Using Financial Statements, Cengage Learning, Boston. Ireland, D, Hoskisson, R, & Hitt, M, 2008, Understanding Business Strategy: Concepts and Cases, Cengage Learning, Boston. Mikler, J, 2013, The Handbook of Global Companies, John Wiley & Sons, Hoboken . Read More