Analysis of Jaguar Case

Determination of the Strategic

Position
Question:
Perform a strategic analysis for Jaguar in
the context of the international market for
luxury cars
Recommend a suitable strategy(ies) for
Jaguar
How to approach this?
Read case thoroughly
Use strategic planning framework to
analyze case
Next: to write out the case: can again use
strategic planning framework to document
your analysis and suggested strategy(ies)
Basic Planning Process
Missions and Goals
External Analysis - Opportunities and Threats
Internal Analysis - Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Strategies
Strategic Planning
A Basic Planning Model

External Environmental Analysis
- PEST
Governments golden share (designed to
prevent takeover) to end 1990
British industry highly unionized; many
different unions
External Environmental Analysis
- PEST
Economic developments have led to major
upturn in demand for luxury cars
Oil prices/interest rates low; standard of
living improvements; low cost of capital
Exchange rate fluctuations
Car manufacturing capital intensive
External Environmental Analysis
- PEST
Move towards environmentally friendly
cars
Conscience factor - not to be seen to be
flaunting wealth
External Environmental Analysis
- PEST
Car manufacturers with broader ranges
exploiting technical/engineering merits
New technologies not solely the domain of
original innovators - available to
competitors
Technological diversification (i.e.,
aerospace industry) produced spinoffs for
car industry
External Environmental Analysis
- PEST (Others)
Legal:
Legislation move in US - remove tax deductible status for
cars > $21,000
Japan opening up
New emmision standards in Europe
Suppliers:
Improvement of Jaguars suppliers quality
Joint venture with GKN Sankey to produce body pressings
instead of buying from Rover - Backward integration?

External Environmental Analysis
- PEST (Others)
Customers:
Customers of luxury cars mostly wealthy - want to
make fashion statement
Customers expect quality, service & excellence
Competitors:
Mercedes, Porsche & BMW main competitors in
luxury sector (Cadillac & Lincoln in US)
Acquisitions taking place

Porter: The Five Forces Model
Risk of entry
by potential
competitors
Rivalry
Among
Established
Firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
Porters 5 Force Analysis
(Structural Analysis)
Potential entrants: Japanese
Barriers: Economies of Scale: Large investment reqd; existing players
enjoying large economies of scale; also high exit barriers due to high
investment
Product differentiation: customers look for certain attributes in luxury
cars
Capital requirements: Car makers require large investments; however,
interest rates low
Access to distribution channels: Difficulty by Jaguar in Germany,
secured Saibu in Japan, upgrading of distribution channels (divorce
themselves from BL)





Porters 5 Force Analysis
(Contd)
Threat of Substitutes
Other forms of transport
Volume car manufacturers (what is a luxury
car?)
Fashion statement through other means -
Condo, etc

Porters 5 Force Analysis (Contd)
Power of Buyers & Sellers:
Buyers demanding excellence, quality &
service
Appears to be no forward/backward
integration (except parts). However
horizontal integration through acquisitions

Porters 5 Force Analysis (Contd)
Competitive Rivalry:
Appears low in the luxury cars? Mercedes
& BMW in Europe; Lincoln & Cadillac in
US
Different cars appeal to different people
SWOT Analysis
Strengths:
Quality/culture identity
History of culture (Pre-BL Years)
Image of luxury
Re-entry into international car races
Upgraded distribution channels
Arrangement with SEIBU
SWOT (Contd)
Weaknesses:
Small car range
Engineering/R&D disadvantage
UNION problems
Dealership network in Germany
Jaguar unable to radically alter design
No economies of scale
SWOT (Contd)
Opportunities:
Economic growth
Japanese market opening up
New technology readily available
US$ exchange rate vis--vis DM

SWOT (Contd)
Threats:
Competition from Mercedes, Porsche & BMW
Japanese may try to enter market
Substitutes - what is a luxury car?
US$ exchange rate fluctuations
US legislation
Governments golden share
Environmental pressures
Strategic Planning - Written
Presentation
Having done an external and internal environmental
analysis, how do you proceed?
How do you present your arguments?
There are many ways: you can use the strategic planning
format as a framework for your written arguments
SWOT, PEST, Porters Analysis go into Appendices
One such way of documentation presented in the next few
slides
Sum up External Environment
Late 1980s a period of economic recovery with increase in demand for
luxury vehicles, oil prices down and interest rates low
More specifically, competition for Jaguar from Mercedes, BMW and
Porsche in Europe (especially from Germany), and from Cadillac and
Lincoln in the US
Fewer players in luxury market - less intensive competitive rivalry
(Jaguar not in good position vis--vis competitors, Japan to enter
market).
Adverse currency movements (Jaguars hedging in the right direction)
and Governments Golden share due; US regulations.
Threat from volume manufacturers who appeared to be able to match
luxury cars on product attributes

Sum Up Strengths
Jaguar successfully recreated quality culture
Jaguar taken on market orientation - customers paramount
Egans heart and minds approach - increased productivity
Jaguar upgraded distribution channels in various countries
Features in Jaguar cars not found in German makes -
image of luxury
Boosted image: entered LeMans
Sum Up Weaknesses
Distribution channel in Germany
Smaller range of vehicles compared to
competitors
Could not radically alter vehicle design as
this would damage luxury reputation (fuel
efficient, more aerodynamic, green cars)
UNION problems with 11 unions - hence
affects productivity
Jaguars Present Strategy
Want to Grow
Reduce dependence on US market - though most
profitable, adverse currency movements and legislation
seen as threats
Want to increase in Germany and enter Japan
Improve quality and dealer networks
Increase range of cars produced
Diversification (consultancy) and want to spend more on
R & D

Proposed Strategy (Need for some
rationalization and streamlining)
Generic strategy: differentiation (cost leadership is
difficult as Jaguar does not have economies of
scale and manpower productivity). Emphasize
luxury and ample design. Emphasize participation
in races.
Within differentiation, focus on wealthy buyers
(Mercedes emphasizes on Engineering and attracts
upcoming rich; BMW attracts yuppies - compete
with S class & 7 Series rather than all)
Proposed Strategy (contd)
Strategic Direction: market development and consolidation
rather than product development (keep the small range;
dont go into consultancy, R&D).
Market development: China, HK, Taiwan & Singapore, oil
rich SEA countries and ME
Consolidate in US and UK
However, Jaguar needs to continue to lower costs, improve
quality and productivity (to support main strategies, and to
forestall takeover after Governments golden share
Some Ratios
Jaguar appears to generate enough profits to
fund market development; Profits before tax
increased 685% from 1980-1987
However, current and acid test ratios low
(1.75 & 1.02)
Low debt to equity ratio (25% in 1987)
Jaguar in a good position to attract loans for
market development
So what happened to Jaguar?
When Governments Golden Share expired... in 1989, Ford acquired
Jaguar. Chairman resigned.
In 1992, the XJ220 tested the exotic car market in Europe but never made it to
the U.Sexchange rate fluctuations proving difficult. But in mid-late 90s,
Jaguar more successful in US.
Retro looka little bit of the same thing. No change in the basic shape.
Emphasize luxury, wealth niche. Small range maintained. Participation in
races continued.
Despite the economic decline in 1990, the company established record sales in
Germany, Italy and Japan during the year.
Towards the end of 1990, a new hourly paid working agreement was
reachednew arrangements with labour developed.
During 1993 Jaguars went on sale in Russia and many of the new Eastern
Block countries. In October...China, a country with tremendous opportunity
for economic growth.
Jaguar appeared to continue R&D expenditure