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Jaguar Land Rover & Toyota - Corporate Strategy Analysis
Transcript of Jaguar Land Rover & Toyota - Corporate Strategy Analysis
Rhys Crane, Sam Eldridge & Matt Lay
Lynch (2011) Prescriptive Strategic Model
Suitability, Feasability & Acceptability Model (Johnson & scholes, 2010)
Resource Based Strategic Approach
Grant's (1991) Dynamic Framework
Finding strategic route forward
Considering Organisational Structure & Style
Comparing Financial Ratios
Strategies Facilitating Current Success & Causing current issues
The external environment
Useful to be able to exploit resources when the environment is volatile. Car manufacturers are highly exposed to the wider economy - particularly a luxury brand such as JLR.
Vision, Mission & Objectives
We have chosen to analyse the strategies of two manufacturers with contrasting brand positions and consider how this causes the implications on corporate strategy to differ
Vision Mission & Objectives
Jaguar Land Rover and Toyota
Both companies are subject to the power of trade unions in the UK.
Both producers would incur higher taxes and greater restrictions on exports should the UK leave the EU.
Both companies benefit from
the option of expansion into
emerging markets, particularly
in China, where exchange rates
European 'anti-car' vision for the future means a potential for a reduction in European demand.
Both companies benefit from lower tax rates in the UK.
UK inflation at 1.9%, interest rate at 0.5%. Cheap debt financing. India at 8% and suffering from high inflation. Flat line Japanese economy and 0.1% interest rate shows a more stable production environment in the UK.
JLR 2013 revenue £15.8bn, up 17%
Toyota revenue £129bn, up 18.7%
JLR £2bn in product investment
Toyota £4.7bn in product investment
UK disposable income rose to £255bn in 2013
Population of UK
Global population to reach 9bn by 2050 - 85% in Asia (IMF, 2014)
Emerging middle classes in China and India
Greater focus on environmental sustainability
Companies now in even more of a price war. This attitude may change over time to give JLR the edge.
UK Gov subsidies for electric cars and vans. Increases demand for Toyota especially.
UK Gov has committed more than £450m to the development of new and green technology via an Advanced Propulsion Centre (APC)
2009 legislation commits manufacturers to cutting emissions to 95g/km by 2020
Companies aware of fluctuating oil prices. JLR note over next 20 years, emerging market demand may push oil up 15%.
Global energy demand up 1/3 by 2035, causing 20% rise in Co2 emissions.
Award for Automotive innovation launched by SMMT to motivate UK companies.
Great focus on Vehicle to Vehicle and Vehicle to Infrastructure technology to reduce accidents.
Focus on development of Intelligent Transport Systems (ITS's) such as Sat Nav to reduce congestion.
260 engineers work for JLR on electric engine technology
Toyota focused on improved safety through technology as they develop assisted braking systems to avoid collisions.
Select strategy which best exploits capabilities
Appraise profit earning potential of resources and capabilties
- Tech investment
- Luxury & performance brand
- But poor green brand
- Huge production real estate & facilities
- Brand of reliability
- Consumer Loyalty (but...)
We have used Grant's (2013) method of tangible and intangible resource appraisal to complete his 'Dynamic Framework'.
- Capacity for large innovation spending
- Invested more in this than any other UK manufacturer (JLR, 2014)
- Quality control/assurance processes
- Ability to mass produce cheaply
- Future envision
- Can exceed current competitors with technology
- This is sustainable but possibly more short term
- Can undercut competitors through low cost production (EoS)
- Well placed to fulfill demand when transition to futuristic car concepts arrives
- Isolate Land Rover's poor green image
- Continue to develop and market performance and luxury brand
- Consider some green innovation as contingency
- Focus on a healthier balance of lean production techniques and quality
- Market image of reliability to restore consumer confidence
- Invest in upscaling production to benefit from greater economies of scale
- Invest in improving green image
- Invest in quality assurance process review/reform
- Invest in improving image of reliability
Basis of Strategic Choice
Things to monitor & consider after implementation
- China debt situation (FT, 2014)
- Value of Japanese Yen (FT, 2014)
- Toyota brand image
- Toyota Leadership style - more transformational? (Haberberg & Rieple, 2008)
* Generative approach to strategic thinking (De Wit & Meyer, 2010)
- Lean production has allowed economies of scale but caused quality issues - years of recalls
- Transnational strategy (Haberberg & Rieple, 2008) catering to different tastes and reducing transport costs
- Attempted diversification from small basic cars largely unsuccessful
- Production upscale just prior to economic crisis
1. Eradicate quality issues and reclaim market share
2. Continue drive to be world's biggest automaker.
What basis for competing?
1. Market penetration
2. Product development
1. Process & marketing
2. Acquisition/joint ventures may be more successful than past diversification
1. Improving quality procedures and marketing reliable image is very suitable as it does not depend highly on external factors.
2. Upscaling might not be in tentative economic climate
1. Focusing on quality is feasible as Toyota have experience of quality procedure review and relevant expertise. They also have finances for marketing drive.
2. Toyota are experts in mass production of specific products, but not diversifying.
1. Fixing quality is low risk but may be slow to show financial rewards.
2. Shareholders may be reluctant to back product diversification because of past performance.
What basis for competing?
Jaguar Land Rover
, a premium British brand owned by Indian firm TATA Motors.
, the Japanese car giant that produces a vast number of units in the UK and is a brand focused more on value.
- Emphasis on performance innovation - high spending
- Marketing focused on performance and luxury
- Almost all operations in the UK
- Improving green reputation
1. Move to more green brand
2. Expand into new markets
on green image
on taking premium brand to new markets
2. Market Development
1. product Development
1. R&D & Marketing
2. Move to Global Strategy
1. Making brand greener is suitable as there are political pressures and potential financial rewards.
2. New markets are suitable as other business have had lucrative success there.
1. May not be acceptable as it could take huge investment to change deep rooted image of Land Rover in particular, and reward may not be worthwhile.
2. Shareholders are likely to back such a potentially lucrative strategy.
1. Feasible because JLR have already shown anbility to cut emissions etc
2. Feasible as JLR have brand which is world recognised.
Minimal environmental impact
Quality and reliability
Low carbon technologies
"A business is not defined by its name, statutes, or articles of incorporation. It is defined by the business mission." - Druker, P
(David, F.R, 2011)
Quality is an interest shared by both companies.
JLR focused on performance and style, Toyota predominantly focused on the environment.
People in general are very focused on the environment and being green.
Perhaps JLR should put more focus into this, offering performance cars that aren't too damaging to the environment.
JLR would be more desirably to those concerned with green issues if reduced environmental impact was incorporated into their mission and so this is perhaps something they should consider.
£15,784m in Revenue for 2012/13
£129,080m in Revenue for 2012/13
£1,215m profit after tax
£2,048m in product investment
£7,734m profit after tax
£4,700m in product investment
Sales volumes up 48% in China
Operating income up 6% for FY2013
- Pressure to be more environmentally friendly
- Emerging market opportunities
- Oil prices - effect on production location & transport costs
- Compulsory green legislation
- Yen depreciation
- World population increase - more demand for affordable motoring
- Oil prices - significant impact on Toyota due to global production
- Premium brand
- But green image issues
- Technology & R&D investment/expertise
- Consumer loyalty
- Production scale/capacity
- Focus on building on reputation of premium brand & driving experience
- Want to fulfill entire world's present & future motoring needs
- Wants to be the world's major auto manufacturer
- But do so in an eco-friendly way
- Expanding into new global markets/
- Move to a new global strategy/
invest time and money into developing new green technologies
- Offering premium cars with heritage and reputation to alternative markets. e.g. China./
Create a range of hybrid powered cars
- Mergers and acquisitions of existing automotive companies/
eradicate quality issues
- Continue mission to become world's biggest automotive company/
reclaim market share lost from the recalls
-Invest in R&D to find and exploit new markets
- Expand into new markets
Obvious choice as the average consumer is not overly concerned about green issues, more with performance and quality driving experience.
they will not want the performance to be affected by it being more environmentally friendly
By merging with technological and engineering firms they will be able to continue to develop more environmentally friendly cars, whilst also improving on quality issues. This will in turn aid their mission of continuing to reign supreme as the worlds biggest auto company
-Move to a new global structure to cope with new, previously unexploited markets
-Possible changes to structure to cope with new staff members and branches of the organisation
JLR should implement
chosen strategy through new
partnerships similar to their existing
Chinese automotive giants Chery.
A new production plant is
currently under development and
will produce Jaguars and Land Rovers
specificall for the Chinese market.
This is a fantastic opportunity for an area
where sales volumes have increased 48%
in one year.
As stated in the option rationale, we consider M&A's as vital to Toyota's continued success. They should implement this strategy through continued use of retained earnings, reducing their use of debt financing to ensure large future cash flows
David, F.R (2011). Strategic Management Concepts. 13. London. PH Professional
Grant, R.M. (1991). The resource-based theory of competitive advantage: implications for strategy formulation. California Management Review, 30(3), 114-135.
Grant, R. (2013). Contemporary strategy analysis, eight edition, Wiley.
Haberberg, A. and Rieple, A. (2008). Strategic management. Oxford: Oxford publication.
IMF (2014) International Financial Statistics [Online] <http://elibrary-data.imf.org/FindDataReports.aspx?d=33061&e=169393> [Accessed 05/03/2014]
Jaguar Land Rover (2013) Annual Report 2012/2013. London, Jaguar Land Rover
Johnson & Scholes (2010). Strategic Choice. Learning Centre. 1. Part 16. Page 17.
Lynch,R.( 2011) Corporate Strategy, Prentice Hall
Noble, J (2014) ‘China bond default unlikely to spark domino effect’. Financial Times. 10/03/2014. [Online] <http://www.ft.com/cms/s/0/a631bf3c-a763-11e3-9c7d-00144feab7de.html> [Accessed 10/03/2014]
Thompson, J (2014). ‘Weak yen flatters Japan Inc’s bumper profits’. Financial Times. 10/03/2014 [Online] <http://search.ft.com/search?queryText=yen+depreciation> [Accessed 10/03/2014]
Toyota (2013) Annual Report 2013. Tokyo. Toyota
(Gov UK, 2013)