Assignment - JLR - 2.1 PDF

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Assignment - JLR - 2.1...

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1.0 - Introduction …………………………………………………………………………………….….….……….2 2.0 - Measurements of Success .…………………………………………………………………………..…2 3.0 - Reasons Underpinning Success .………….………………………………………….……………….5 3.1 - Innovative Consumer-based Culture...………………………….………….…………………..5 3.2 - Strong Financial Position ………….…………………………………..…..……….………………..5 3.3 - Pioneering Product Design ……………….……………………………………….…………………5 3.4 - Huge Global Demand …..…………………………….……………………………….…….…………6 3.5 - Award Winning Customer Service ……………….………………….……….….……………….6 3.6 - Leadership and Management ……………………………………………….…….……………….6 4.0 - Analysis of Company’s Capabilities 4.1 - Value Chain Analysis…………………………………………………………………….…….………..7 4.1a - Primary Activities……………………………………………………………………….…….………..7 4.1b - Supporting Activities………………………………………………………………………….………8 4.1c – Summary of Value Chain Analysis……………………………………………….……………..8 4.2 - VRIN framework…………………………………………………………………………….……………9 4.2a -Value…………………………………………………………………………………………….……….….9 4.2b - Rarity…………………………………………………………………………………………….………..10 4.2c- Inimitability…………………………………………………………………………………….………..10 4.2d - Non-Substitutability……………………………………………………………………….………..11 4.2e - Summary of VRIN framework………………………………………………………….……….11 4.3 International Strategy Framework……………………………………………………….………12 5.0 - Leadership of Jaguar Land Rover…………………………………………………………….……..14 6.0 - Continuation of Success…………………………………………………………………………………16 References………………………………………………………………………………………………………………17

1.0 Introduction Jaguar Land Rover plc. is the UK’s largest multinational corporation based within the automotive manufacturing industry. The company is built upon two established and world renowned British car brands; Jaguar - “One of the world’s premier luxury sports saloon and sports car marques” and Land Rover - “The world’s leading manufacturer of premium all-wheel drive vehicles” (Jaguar Land Rover, 2014). Today, Jaguar Land Rover is run as a subsidiary of Tata motors an Indian car manufacturer, after they acquired the businesses in 2008 from Ford, merging the two iconic British companies together (Tata Motors, 2008)

2.0 Measurements of Success The general definition of success is “The accomplishment of an aim or purpose” (Oxford English Dictionary, 2014). However when relating this to a business context, the definition is much more subjective and specific to the particular organisation or industry, as managers and companies define the level of success in different ways (Wainer & Rubin, 1969). Jaguar Land Rover (JLR) has a set of organisational aims defined below, which are “built upon the tradition and values that made the Jaguar legend”. 

A1 - Demonstrate Leadership in sustainable business practice

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A2 - Create products that meet the customers’ needs

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A3 - Inspire Future Generations

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A4 - Become a leader in sustainable future development

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A5 - Engage our people, customers and workforce

(Jaguar Land Rover: Our Aims, 2014)

These aims directly relate to the ambitions and purpose of JLR, therefore the completion of these aims can be deemed as a success that is directly applicable to the organisation itself. JLR have seen their sales revenue grow substantially over the last few years (Figure 1), their revenue has more than double since 2010 from £6.5 billion to over £15.7 billion in 2013, setting a new sales record for the company (The Guardian, 2014). This somewhat shows that the global financial crisis didn’t deter there rapid expansion of sales and growth. The increase in sales relates to A2 and highlights the customers need for JLR products this shows that this aim is being achieved and could be defined as success as the company is achieving their objectives.

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Figure 1 - Jaguar Land Rover plc. - Revenue Analysis Year

JLR -Revenue (£m)

Trend Analysis (%)

JLR - Net Profit (£m)

Trend Analysis (%)

2010

£6,527m

2011

£9,871m

↑51.23%

£1,036m

↑7006.67%

2012

£13,512m

↑37.40%

£1,481m

↑42,9%

2013

£15,784m

↑16.81%

£1,065m

↓28.10%

-£15.0m

As well as boasting increased revenue, JLR have remained extremely profitable (figure 1), consistently (Data obtained from JLR annual reports) posting, retained profits of over £1bn for the last three years (see note) (Jaguar Land Rover: Annual Note: 2013’s profits where reduced on the previous year as they rewarded the shareholders with a dividend for first time in 5 years totaling £150m.

motors profit

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announcements. Tata announced that their 3 quarter profits had tripled to their highest point in 18 months, as high global demand for its luxury JLR vehicles have propped up the profits for the past 2 financial years (Reuters, 2014). JLR profitability has vastly improved the financial position of Tata, this has had a positive effect on share holder wealth (see note), a fundamental characteristic of a successful company. JLR could be classified as successful through the marketing and selling of their products on a global scale. Since the merger of the two companies and purchase of JLR from Ford by Tata motors, JLR have been able to penetrate more markets worldwide, increasing the globalization of their products. This has allowed them to recognize the demand for products from emerging markets and following a significant cash injection from Tata, JLR were able to design new models such as the Evoque which helped increase their market share in the global industry. For example, Land Rovers market share in the UK was boosted by 2.5%, in the US Land Rover share was increased by 6.1% (Jaguar Land Rover: Trading Update, 2013), while China overtook the UK as JLR biggest market following the introduction of the Evoque and Range Rover Sport (Guardian, 2013). JLR strive to be recognized for practicing business in a sustainable and responsible way, while engaging young people, encouraging them to seek employment in the sector. In 2013, JLR were awarded ‘Responsible Business of the Year’ by BITC, this is an example of a non-financial measurement of success that is applicable to JLR as it relates to completion A1, A3 and A4 addressed above (BITC, 2013).

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3.0 Reasons Underpinning the success of Jaguar Land Rover 3.1 Innovative Consumer-based Culture ‘The Jaguar Land Rover Way’ refers to the organisational culture of JLR, which is based on a set of core values, deeply embedded in the foundation of the company. This culture places the customer first, and places a distinct emphasis on environmental innovation to achieve sustainable growth, (Jaguar Land Rover: Culture and Values, 2014). A Consumer orientated culture is important in the manufacturing industry as the customer is at the forefront of every business decision during the entirety of the products life cycle. This allows JLR to produce products that directly appeal to the needs of the customer, matching the consumers demand for high quality JLR products, avoiding the occurrence of a ‘strategic drift’, as the company remains contemporary and competitive (Parasuraman, 1987). 3.2 Strong Financial Position Tata are a highly valued company with assets valued at £50 billion. This strong financial position has allowed them to heavily invest in the JLR, and inject a significant amount of cash to help open up and exploit opportunities for growth (Guardian, 2014).This has seen JLR substantially increase their recent financial performance, regularly posting higher sales and profits, contributing towards the success of the company. 3.3 Pioneering Product Design Jaguar Land Rover remains at pinnacle of advanced design. This is being achieved through constant technological innovation, product refinement and pushing the boundaries of engineering, increasing both efficiency, comfort and performance. The on-going push for improvement, whilst maintaining the history and key principles that has seen both Jaguar and Land Rover products excel for decades acts as a Student ID -W11011696

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USP for the company allowing repeated sales with existing customers and increased sales in new markets. (Land Rover, 2014: Jaguar, 2014) 3.4 Huge Global Demand A huge global demand exists for JLR products; this increase in demand features in both existing markets where JLR are very established such as the UK and the USA and new emerging markets such as China and India, which JLR are successfully penetrating, thanks to their ability to recognize potential opportunities. JLR have been able to expand their operations and facilitate the growing need for JLR products from the consumer. This has greatly contributed to the success of JLR and has seen their international sales almost double over the past 12 months (Express, 2014). 3.5 Award Winning Customer Service JLR have recently been ranked ‘No. 1 by customers for their service in a survey conducted by What Car? and JD power. Jaguar dealerships ranked highest on the survey with 85.5% customer satisfaction, with Land Rover placing fifth. Having a high level of satisfaction with JLRs dealer network is fundamental as it is the most important point of contact they have with customers (Jaguar, 2013). A high quality customer service is beneficial to JLR as it creates a more positive experience for customers; this contributes towards the reputation of JLR, and is vital for customer retention, profitability and sales, all of which add to the success of the company (Zeithaml, 2000). 3.6 Leadership and Management The recent success of JLR can be attributed to the management of the company, particularly since Ralf Speth took over as CEO in 2010. Speth, who has experience working at top-level management positions at BMW, has seen a substantial turnaround occur in the company since he took over. Sales have dramatically increased, new high profile models such as the XJ and F-Type have been successfully integrated into JLR extensive product range and there has been a significant increase, regarding the profitability of the company (Jaguar Land Rover: Leadership, 2014), net profit has risen from a loss of 15m for 2009, to consistently posting net profit of over £1bn for the last 3 years (see Figure 1).

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4.0 Analysis of the Companies Capabilities 4.1 Value Chain Analysis Value chain analysis can be used to identify main activities along the chain that contribute towards the creation of value. These activities can then be investigated to see if they relate to the organizations competitive position (Fearne et Al, 2012). JLR have implemented a differentiation product strategy, this means the value chain has a specific importance to the company in regards to out-competing competitors (Hilletofth, 2009). Figure 2 - Porter (1985) Basic Value Chain

4.1a Primary Activities Porter (1985) distinguishes between the use of primary and support activities in the creation of value. Primary activities are specifically concerned with the creation and delivery of a product (Recklies, 2001). Figure 2 (above) showcases the categories of activities that are classified as primary. JLR use of a differentiation strategy means their cars are associated with high quality. JLR use strategic capabilities such as brand, innovation and experience throughout the entire primary activity set to provide the Student ID -W11011696

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company with a competitive advantage. Through substantial investment and years of experience in regards to the manufacturing process JLR are able to manufacture their products in less time, this allows them to stay in time with the demand. Additionally, JLR manufacturing lines have the best equipment and tools available; this reduces defect rates, improving customer satisfaction and enhances the quality of the end product. This allows the company to produce cars to a consistently high standard, adding value for the customer, boosting the reputation of the brand and increasing the demand for their cars. This provides the company with a financial benefit as JLR are able to charge a high premium price to consumers as a result of having a ‘luxury brand status’, providing the company with a competitive advantage; this also ties in with differentiation strategy in use. This demonstrates how JLR use capabilities such as experience and brand to add value and increase their competitiveness. 4.1b Supporting Activities Supporting activities relate to activities which aren’t specifically involved in the production of an end product, but do improve the efficiency or effectiveness of a process (Woudstra & Powell, 1989). JLRs unique innovation and technology capabilities enable the company to improve manufacturing efficiency and provide solutions to products to meet the complex requirements of the customers. This is important to JLR, as it allows them to appeal directly to the needs of the customer and provide them with a highly customizable product, adding value to both JLR and the customer through reinforcement of their differentiation strategy (UNIDO, 2003). The technology/ research and development division ties in with JLRs innovation capability is a fundamental component of the company’s value chain despite being classified as a support activity. This capability is critical in providing them with a competitive advantage; as it lets JLR be the “first movers” in new markets, leaving the competition to catch up (UNIDO, 2003). JLR add significant value through effective human resource management (HRM), by doing this staff become more highly skilled and are in-sync with the strategic vision of the company, this helps create a high quality product and ensures employees are engaged in producing cars the ‘JLR way’ (Hults, 2011) 4.1c Summary of Value Chain Analysis Their differentiation strategy means value needs to be added through an increase in quality. After analysing JLR’s value chain a number of core capabilities have been identified that Innovation, brand, management, experience and leadership all add value and provide JLR with a competitive advantage, through increasing the quality of JLR products.

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4.2 The VRIN framework In order to create and sustain a competitive advantage, JLR use their strategic capabilities to help them adapt to the volatile automotive industry (Cui & Jiao, 2011). The VRIN analysis developed by Barney & Hesterly (2006) can be used to identify JLR’s key competencies in relation to value, rarity, inimitability and non-substitutability, to see if they provide the company with a sustained competitive advantage. Some of JLR capabilities identified in 4.1 (value chain analysis) have been addressed in figure 3 (above) in relation to the VRIN criteria. Figure 3 - Jaguar Land Rover plc. - VRIN Analysis Capability

V

R

I

N

Innovation

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Leadership

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√

√

X

Management

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√

√

X

Brand

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√

√

√

Experience

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4.2a - Value Using their innovation and design capabilities, JLR are able to offer a unique and high quality product to their customers. Using the JLR brand, (which has been established for over 60 years and is highly associated with high quality) and innovation capabilities together will reinforce the differentiation strategy and add significant value as they are able to charge a higher price for their models, providing a competitive advantage to the firm (Hoskisson et Al, 2012). Value is also created as a result of the company’s vast experience. Jaguar has a rich history in the world of motor sport, whereas land rovers have a large amount of heritage and status in the multiple

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communities such as off roading, military, agriculture e.t.c. JLR has pre—existed a number of its closest competitors in the automotive industry (Volkswagen - 1937, Mercedes Benz – 1926) this has enabled them to generate more experience than rivals, and create a company specific culture which is deeply enriched in the company over a significant period of time, providing them with a competitive advantage and a distinct strategic outlook (UNCTAD, 2013). The Management and leadership of JLR adds value to the company, as it enforces the JLR’s unique innovative culture and strategy throughout all activities involved in producing a high quality end product, in a sustainable way. Furthermore the management of the company recognizes the importance of internal investment towards HR; training staff is fundamental for continuous improvement, increasing the quality of output and expanding their product range to increase the demand for JLR products, all of which aid in the creation of value (Hults, 2011). 4.2b - Rarity The JLR brand and industry experience can be classified as rare capabilities. These capabilities have been built up over a substantial time period and are completely exclusive to the company, as no other company can posses the branding of their cars or obtain their knowledge and experience. JLR’s heavily invest in their innovation and design capabilities; this allows the company to develop pioneering ideas and innovative features to improve and extend their product range for a sustained advantage. These capabilities are rare, as JLR protect new ideas through patents, this provides a legal barrier that inhibits competitors, possessing and implementing new designs into their products (Fresh Patents, 2014). This allows JLR to develop products with exclusive features, increasing long-term performance and provided them with a sustained competitive advantage (Johnson et Al, 2011) . 4.2c – Inimitability The culture, branding and experience are all capabilities that are unable to be imitated by competitors. The innovative culture cannot be replicated by rivals as ‘Jaguar Land Rover way’ is deeply embedded into the foundations of the organisation, effecting every activity and employee at JLR, motivating the processes and staff performance to maintain high quality and ensure customer orientation to produce the best product. Furthermore the JLR brand is built upon these beliefs and ideologies; therefore it is also idiosyncratic to the firm (Johnson et Al, 2011).

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The management and leadership of JLR are inimitable as these capabilities are only relevant to JLR operations. The Management and leadership style at JLR, implements and enforces the culture of the company into the workforce of over 26000 employees worldwide (Jaguar Land Rover 2014). This means it would be difficult for competitors to obtain and employ this style of management into their operations, as it would take a substantial amount of time and money to modify the existing culture.

4.2d - Non-Substitutability Capabilities that match the criteria of value, rarity and inimitability provide the firm with competitive advantage however for the firm to sustain them, they need to be non-substitutable (Johnson, 2011). JLR’s innovative culture, brand and experience are all non-substitutable as they are only relevant to this company and its processes. Alternatively the management and leadership of the company are substitutable as another individual can replace capabilities that involve a human resource such as a manager. 4.2e - Summary of VRIN Analysis VRIN analysis has highlighted capabilities that contribute towards the success of the company by offering JLR a sustained competitive advantage. On the other hand, management and leadership capabilities do provi...