Jaguar Land Rover Company Report

1 | P a g e Laurence Parkins 1218923

COMPANY ANALYSIS REPORT: JAGUAR LAND

ROVER AUTOMOTIVE LTD. (JLR) TABLE OF CONTENTS

Summary ............................................................................................................................................................................... 1

Introduction .......................................................................................................................................................................... 2

Products ................................................................................................................................................................................ 2

Of Jaguar Cars ................................................................................................................................................................... 2

Of Land Rover ................................................................................................................................................................... 3

Competition: First of Porters 5 Forces ................................................................................................................................. 3

Internal Strengths (SWOT) and Competitive Advantage ...................................................................................................... 4

Internal Weaknesses (SWOT) ............................................................................................................................................... 4

External Opportunities (SWOT) ............................................................................................................................................ 5

External Threats (SWOT) ....................................................................................................................................................... 5

3 Strategic Recommendations .............................................................................................................................................. 6

Continue expansion into emerging economies ................................................................................................................ 6

Increase focus on eco-friendly research and development ............................................................................................ 6

Avoid reaction to exchange rate ....................................................................................................................................... 6

Glossary of Terms ................................................................................................................................................................. 6

Works Cited .......................................................................................................................................................................... 7

SUMMARY

This report identifies Jaguar Land Rover Automotive Ltd. (JLR) as a profitable designer and manufacturer of mid/high-

end sports saloons and SUVs. After recording losses for many consecutive years, it has seen a huge improvement in

general performance since acquisition by Tata Group of India, recently taking a profit in excess of 1.5bn in FY12 (1).

It faces stiff competition from German firms such as Mercedes Benz and BMW, who operate in a similar sector, both

achieving 285% of JLRs unit sales for yearend 2011 (2) (3).

A SWOT analysis (Table 1) identifies a number of points referenced further on to recommend 3 major strategies JLR

could employ to maintain its record performance.


Strengths Weaknesses Opportunities Threats

Takeover by Tata Motors has boosted investment potential; 1.5bn by 2012 (4)

Half the performance per employee of BMW as a result of trade union influence (5)

Rapid growth of BRIC economies such as China; at least 7% real annual GDP growth since 1999 (6)

Few eco-friendly offerings means rising fuel prices may adversely affect JLR sales

Successful new products e.g. Range Rover Evoque, 51881 units sold by FY12 (7)

Lost previous owners (Fords) relevant experience in the sector after acquisition

Consumers becoming more environmentally conscious, loan of 340m secured to conduct R&D (8)

Powerful trade union influence in the UK has proportionally greater effect on JLR efficiency to competitors

Railhead terminal has increased distribution potential (9)

Weak pound boosts JLR exports, drives revenue increase of 37% from FY11-12 (10)

Foreign partnership may weaken brand image; deter UK customers

Table 1: SWOT analysis outline

3 recommended strategies identified are as follows:

Continue expansion into emerging economies:

o 2012 Cherry PPP is an example of successful implementation (11).

o Potential to expand into India through Tata Motors Ltd.s distribution channels.

Increase focus on eco-friendly research and development:

o Become future fuels/eco-friendly automobile market pioneer (12) and exploit temporary monopoly

power by leveraging government grants and investment by Tata Group.

Avoid reaction to exchange rate:

o Do not sacrifice up-market brand image to achieve a temporary revenue boost which will be of

negligible long-term benefit.

INTRODUCTION

This report shall briefly analyse the market position and performance of Jaguar Land Rover Automotive Ltd. (JLR),

owned by Tata Motors Ltd., a subsidiary of Tata group conglomerate (13). It should also present 3 key strategies to

achieve the companys objectives in the future. Distinctions between Land Rover and Jaguar Cars (the main 2

subsidiaries of JLR) will be made where appropriate.

PRODUCTS

OF JAGUAR CARS

Jaguar Cars, founded in 1922, is one of the worlds premier manufacturers of luxury saloons and sports cars, such as their latest car: the F-Type (Figure 1), to go on sale mid-2013 (14). Racing variants of most models are available, e.g. the XKR-S, allowing access to the lucrative performance car market with a sale price of >79,995 depending on configuration (15).

Figure 1: Jaguar F-Type (16)


OF LAND ROVER

The Land Rover brand (which became a business entity in 1970) has long held a reputation for producing rugged and

dependable off-road vehicles, such as the highly versatile Defender (Figure 2) (17). However, starting with the release

of the Range Rover in 1970 they have expanded into the luxury SUV market (Figure 3), with the comprehensive off-road

ability being an order winner to many despite it being unnecessary in most cases (18) (17).

Figure 2: Land Rover Defender (19)

Figure 3: Range Rover Evoque (20)

COMPETITION: FIRST OF PORTERS 5 FORCES

In general, vehicles produced by JLR fall into the luxury saloon/sports car or luxury SUV categories. A number of automobile manufacturers compete almost directly with JLR in these sectors, the largest of which are described in Table 2. These figures represent the global oligopolistic market; there are multiple region-specific variations. For example, in the USA, Chrysler serve as the primary competitor to JLR, with 43,000 units sold compared with JLRs 5,000 between Jan 12/13 (21).

Company Unit Sales 2011 Sales Index (JLR=100)

Mercedes Benz

1,380,000 (2) 285

BMW 1,380,000 (3) 285

Audi 1,370,000 (22) 282

JLR 485,000 (23) 100

Volvo 449,000 (24) 92.6

Porsche 119,000 (25) 24.5 Table 2: Unit Sales for JLR's Competitors, '11


INTERNAL STRENGTHS (SWOT) AND COMPETITIVE ADVANTAGE

Since acquisition by Tata Motors Ltd. In 2008, JLR has been able to take advantage of the $77.7bn capital

reserves of Tata Group, as of March 2012 (26). Confidence in the JLR brands led to a doubling of [the

substantial initial] investment to $1.5billion by Tata Motors Ltd. In February 2012, to finance development of

new models and accelerate expansion into developing overseas markets, e.g. the BRIC economies (4). This has

led to greatly increased business performance, see Figure 4.

The critically and commercially successful Range Rover Evoque (Figure 3), released 2011, has bolstered brand

recognition and proved to be the driving force behind the 33% Land Rover sales volume increase, see Figure 5.

Railhead terminal at Castle Bromwich plant near Birmingham provides a direct, high capacity link to

Southampton Docks, facilitating rapid delivery of high volumes of units to overseas customers, saving 60

million lorry miles per year (9).

Figure 4: JLR Net Profit, '07-'12 (5)

Figure 5: Land Rover Sales Composition, '11 & '12 (7)

INTERNAL WEAKNESSES (SWOT)

Low profit per employee compared with primary competitors, e.g. Mercedes Benz, see Table 3. This highlights inefficient use of available resources, hence low productive efficiency.

Tata Motors Ltd.s experience lies in small cheap cars and large commercial vehicles, so had little specific market expertise to offer JLR upon purchase.

Company Profit per Employee FY11, (5)

Mercedes Benz

177,000

BMW 146,000

JLR 73,000

Table 3: Profit per employee of JLR's 2 main competitors

-4E+08

-3E+08

-2E+08

-1E+08

0

100000000

200000000

300000000

400000000

2007 2008 2009 2010 2011 2012

Net

Pro

fit,

FY'11 FY'12

Freelander Defender

Range Rover Discovery

Other Range Rover Evoque


EXTERNAL OPPORTUNITIES (SWOT)

Exceptional Chinese macro-economic growth is a strong prospect for continued expansion of the company, with high annual real GDP increases (see Figure 6) driving consumer spending power and confidence. JLR sales in China are already up 76% for FY12 thanks to establishment of 201 NSCs.

Figure 6: Real Chinese GDP Growth, '99 - '12 (27)

Exploit shift in consumer values towards eco-friendly cars, a sector which is likely to dominate the automotive

industry in the future as fossil fuel reserves are depleted. The European Investment Bank granted a loan of

340m to fund R&D to tackle this issue in their products (8).

A favourable exchange environment has increased product demand and revenue (up 37% from FY11) (7)

(10). This is an opportunity for JLR to increase its foreign market share.

EXTERNAL THREATS (SWOT)

Present lack of eco-friendly cars makes eco-awareness and persistent fuel cost increases (see Figure 7) a threat to JLR. Further increases may compel even the predominantly high-earning JLR consumer base to migrate from JLR.

Figure 7: Petrol Prices, '02 - '12 (8)

Partnership with Chery Automotive could dilute perception of the classic British heritage of JLR, which is a primary USP especially in the UK market.

Country Employees in

union, %

UK 27

Germany 19 Table 4: Trade Union Membership Rates (28)

0

2

4

6

8

10

12

14

99 00 02 03 04 05 06 07 08 09 10 11 12

Rea

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P G

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Year

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

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02 03 04 05 06 07 08 09 10 11 12

Pri

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Year


3 STRATEGIC RECOMMENDATIONS

CONTINUE EXPANSION INTO EMERGING ECONOMIES

It is imperative that JLR treats growth in the BRIC economies as an opportunity, or its competitors will swiftly establish a dominant market position. The 2012 PPP with Chery Automobile (Figure 8) (a Chinese state owned corporation) is an effective implementation of this strategy (29). Circumvention of state protectionist policies such as the large import tariff on foreign vehicles of at least 25% (+17% VAT) depending on engine size is now possible (27). The powerful engines present in most JLR models may have otherwise taken prices above competitive levels.

There is potential to utilise Tata Motors Ltd.s established distribution channels within India, which should be utilised should rapid expansion into India be deemed prudent, likely as a reaction to movement by a competitor.

Figure 8: Chery Logo (30)

INCREASE FOCUS ON E CO-FRIENDLY RESEARCH AND DEVELOPMENT

As JLRs primary competitors have so far failed to claim a significant share of the eco-friendly/future fuel auto market,

this is a great opportunity for JLR to implement a market pioneer strategy (12). Implementation will have low

uncertainty because alternative fuels will eventually become entirely necessary, and the creation of a temporary

monopoly will lead to supernormal profits in the short-term, depending on speed of reaction by competitors.

JLR should establish a technological advantage by channelling available resources to R&D of future fuels and eco-

friendly cars, such as the C-X75 concept, which investigates an electric jet propulsion system (31).

AVOID REACTION TO EXCHANGE RATE

The favourable exchange environment for JLR (1 GBP = 9.68 CNY) (32) is reducing the price of JLRs exports, and as a

luxury, up-market brand, JLR products have an elastic PED ratio. Theoretically price should be lowered to stimulate

demand and increase revenue and market share. However, a large opportunity cost would be incurred in this situation:

there is a risk of damaging the strong brand image possessed by JLR; currently a product differentiator. Therefore a

reduction in (the already reduced) price should be avoided.

GLOSSARY OF TERMS

A favourable

exchange

environment

Weakening of GBP compared with local currencies of major target markets

BRIC Economies Acronym for the emerging economies of Brazil, Russia, India and China

Conglomerate corporation consisting of several companies in different businesses

Differentiator See USP

Market Pioneer Company that takes the risk of being first to introduce a product into a market or sector

Monopoly Definition of monopoly: A situation in which a single company owns all or nearly all of the


market for a given type of product or service

NSCs National Sales Companies

Oligopoly A market dominated by a small number of participants who are able to collectively exert control

over supply and market prices

Opportunity Cost The cost of passing up the next best choice when making a decision

Order Winner The feature or selling point that makes a consumer choose a given firm's product over a

competitors

PED ratio Responsiveness of demand of a good to a change in price. A ratio of |1| is

elastic

PPP Public Private Partnership: public and private sectors working together

Productive

Efficiency

When all resources are being fully utilised to minimise average cost per unit

Protectionist

Policies

When a government legislates against foreign firms to protect domestic industries. Import

tariffs are an example.

Sector A distinct subset of a market, society, industry, or economy, whose components share similar

characteristics

Supernormal

Profit

Abnormal profit, also referred to as supernormal profit, is an economic term of profit exceeding

the normal profit

SWOT Analysis Situation analysis in which internal strengths and weaknesses of an organization, and external

opportunities and threats faced by it are closely examined to chart a strategy. SWOT stands for

strengths, weaknesses, opportunities, and threats.

USP Unique Selling Point

WORKS CITED

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[Cited: 12 January 2013.] http://www.indexmundi.com/g/g.aspx?c=ch&v=66.

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Jaguar Land Rover Company Report