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)
Strategic Planning
• A Basic Planning Model
Basic Planning Process
Missions and Goals
External Analysis - Opportunities and Threats
Internal Analysis - Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Strategies
External Environmental Analysis
- PEST
• Government’s 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 Jaguar’s 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
Bargaining Bargaining
Among
power of power of
Established
suppliers buyers
Firms
Threat of
substitute
products
Porter’s 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)
Porter’s 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
Porter’s 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
•
Porter’s 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-à-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
• Government’s 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, Porter’s 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-à-vis competitors, Japan to enter
market).
• Adverse currency movements (Jaguar’s hedging in the right direction)
and Government’s 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
• Egan’s 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
Jaguar’s 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;
don’t 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 Government’s 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 Government’s 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.S…exchange rate fluctuations proving difficult. But in mid-late 90s,
Jaguar more successful in US.
• Retro look…a 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
reached…new 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
