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Unit 1 External and internal environment Assignment
Diploma in Business
Unit Number and Title
Unit 1 – Business Environment
This Unit 1 External and internal environment Assignment is discussing about the strategic management of an organization that needs to assess the external and internal environment of an organization. The organization that has been selected for this assignment is Jaguar. Jaguar is the luxury vehicle brand of Jaguar Land Rover which is a British multinational car manufacturer headquartered in Whitney, Coventry, England. The ownership of the luxury vehicle brand is with the Indian company Tata Motors from 2008. This well known car company in the automobile car industry was formed by Sir William Lyons and William Walmsley in the year 1922 by the name of Swallow Sidecar Company. In 1945, the Swallow Sidecar Company changed its name to Jaguar Cars Limited. In 1989, Ford took over the company and in 2008, it was sold to Tata Motors. In this task, it is required to a critical analysis of the external and internal environment of the car company. In this regard, the current strategic issues that the automobile industry as well as the car company is facing need to get considered as well as the key trends that will be affecting the automobile industry in the estimated future.
Automobile Industry – An overview
Market size (Global Automotive Industry)
Sales of passenger cars globally had hit approx. 80 million vehicles in 2015. The largest automobile markets throughout the world comprises of China and the US amongst the others, in respect of production as well as sales. As per data, around 7.7 million passenger cars were sold to the customers in the US in 2014, and there took place the production of almost 4.25 million cars also in 2014. In the early 1900s when there occurred the introduction of the assembly line car production by Ford, the US became a major market for automobiles towards the extensive manufacturing of is Model T. In the present scenario, the Ford Motor Company is still ranking among the leading passenger cars manufacturers and at present, its most well known model is Ford Focus that was regarded as the bestselling car globally in 2013 as well. Regarding profits, the list is topped by major makers of automobiles such as Toyota, Volkswagen as well as General Motors whereas the automotive supplier industry is having the dominance of Bosch, Continental, Denso as well as Magna. It is being speculated that in the coming decade, car technologies having internet connectivity as well as autonomous vehicles will be stirring up one more automotive sector revolution. In 2014, around 23% of US customers responded to a survey that they are keen to purchase a car that is fully autonomous the main reason being that they consider autonomous vehicles to be having more safety in comparison to the conventional cars. (Lind, 2014) The international market in respect of autonomous driving hardware components is having an expectation of growth from 400 million US dollars in 2015 to 40 billion US dollars by 2030.
Worldwide production of cars
The above graph is displaying the global automobile production from 2000 to 2015. There occurred the production of almost 47 million cars globally in 2005. This figure was around 41 million towards the manufacturing of cars internationally in 2000. In 2015, the use of passenger cars were around 68.56 million globally and the production of more than 65 million units took place in the same year. Globally, it is being speculated that the sales of passenger cars will be continuing to grow to almost 100 million units by 2017. In the time of 2008-2009 economic turmoil, there occurred a drastic fall in the sales of cars. In the present scenario however, there has been a considerable growth in the sales of automobiles due to the rising demand, particularly in the markets in Asia. (Griffin, 2015) Currently, China is being considered as the largest manufacturer of passenger cars globally making a production of more than 18 million cars in 2013 and constituting of more than 22% of the production of passenger vehicles globally.
The above statistics is representing the number of cars that were sold globally between 1990 and 2015. Also, a forecasting is made for 2016 as well. It was speculated that by 2016, around 75.24 million automobiles will probably be sold. By 2020, the sales of cars are speculated to go beyond 100 million units internationally.
Sales of international cars
Till the end of 2015 it was forecasted that the manufacturers of automobile will be selling more than 72 million vehicles that increased from less than 65 million units in 2012 due to the recuperating industry for automobile in the EU as well as growing demand in respect of cars in Asia as well as North America. For increasing the sale of cars globally, carmakers are specifically interested to tap the increasing riches of the Asian markets where there has occurred the doubling of the sales of passenger vehicles in the last 7 years. The sales of cars are also rising in countries like India, Malaysia as well as Indonesia. The sales of vehicles in China have increased to an astounding figure of 24.6 million vehicles in 2015. General Motors or Volkswagen that are considered as the leading car manufacturers observed growing sales throughout every market in Asia in 2014 and the Ford Motors Company is forecasting that Asia Pacific will be contributing almost 40% of its vehicle sales in the span of 4 to 5 years. (Lind, 2014) It is anticipated that car makers will be undertaking unparalleled programs for investment regarding business growth not just in China as well as India but in the other rising markets as well.
Growth of automobile industry
It is being estimated that in the next five years, the international automobile industry will be facing a reduced market growth down from an annual 3.1% (between 2007 & 2014) to an annual 2.6% (between 2015 and 2021). Simultaneously, the automobile industry is required investing tens of billions of Euros in C.A.S.E. capabilities which is an acronym for Car connectivity (C), Autonomous or assisted driving (A), new mobility or car sharing (S) as well as electrified power trains and elements (E). (Lind, 2014) However, the earnings of the industry are at present not sufficient for this humongous task particularly in respect of certain manufacturers of volume. For taking care of the required investments the automobile business will be seeing a succession of alliances and mergers in the coming years. The international marketing for light vehicle will observe a reduction in the annual growth rate of 2.6% in the next seven years in contrast to 3.1% between 2007 and 2014. The BRIC countries, the major players regarding automobile growth for more than a decade are currently falling from their position. The demand of vehicles in the triad countries has reached its level of saturation at a forecasted compound annual growth rate of just about 1% till 2021. (Griffin, 2015) In North America, the automotive boom for the US during the last few years will be reaching its zenith in 2017 and will facing a decline post that. The market in Japan as well as Korea will be continuing to decline at an average of -2% every year. The market in Europe will at last be recovering from its long slump, as well as delivering the annual growth rates of 2.2% in the next half of the decade considering the fact that the political as well as economic condition will get stabilized in Russia.
C.A.S.E. is summarizing the four major tasks regarding development the auto industry requires mastering within the next decade. These are regarded as Connectivity, Autonomous driving, Sharing as well as Electrification. These needs are triggering requirements for investment on top of normal development work in respect of new vehicles and will be bringing major changes not just to the technology that is currently available as well as supply chain, but also regarding business models that have been established as well as profit pools. The anticipated pools of profit regarding the automobile industry will be having close link not just with the hardware but increasingly to the software of the car as well as to the collection and application of real-time data. (Bonoma, 2011) The software as well as online services based on data will be defining the experience of the future users regarding cars to a higher level and the automobile industry should ensure not losing this essential aspect of the business to the software as well as internet players. Let us elucidate on C.A.S.E.,
- Connected– In the coming 4 years, the volume of the international market in respect of connectivity services as well as hardware will be doubling from a forecasted 20 billion dollars to 40 billion dollars and most of it will be services as well as apps. In the previous decade, there was a shift of the automotive OEMs from traditional, hardware-centric in-vehicle infotainment as well as systems of communication to connectivity solutions that are software based. As per the data received from CCF aka Connected Car Forum more than 20% cars that were sold internationally in 2015 comprised of embedded connectivity solutions. (Bakker, 2014) In addition to that, as per the finding of the study, there is a huge possibility that every new car will get connected in several ways by 2025.
- Autonomous – The self-driving car will be developing gradually and the initial steps have already been considered through self-parking assistants, adaptive cruise controls as well as lane keeping assistants. In 5 to 10 years, it will be technically practicable to have entirely autonomously driving cars having “hands-off experience” on roads but it is also expected that questions regarding liability as well as limitations on driving will be limiting the utilization of autonomous cars in respect of particular applications as well as distinct environments. (Bakker, 2014) Prior to 2035, infrastructures regarding nationwide autonomous driving will not be having their availability. Till date, there exists only handful of major suppliers in respect of overall autonomous technological aspects even internationally.
- Shared– Almost every OEMs have began experimenting with car sharing, by and large in cooperation with car rental organizations. On the other hand, for building a leading business for car sharing, there exist high open investments as well as there is a difficulty in sustaining the earnings. But having stated that car sharing is showing a stable development of almost 30% every year, therefore a grip in the automobile market might be proving to be a key strategic benefit regarding the future. In addition to this, car sharing is an example of an approach regarding new ownership that are being invested in by many, which might be with specific-use vehicles from GM or Toyota or Uber’s new model of business. (Baines, 2012)
- Electrified– In spite of a growth in sales of 60% in 2014, Electric Vehicles aka EVs remain a niche market having an international share of 0.4% in overall sales. EVs will be requiring the support of the government to commence ad except Norway, a very limited number of countries are possessing programs that are considered effective as well as allocation of funds to bring the markets for EV to scale. On the other hand, because of high level of pollution in many cities, there might occur a growth in the local EV privilege zones.
Organizational strategy for Jaguar Car Company
The car did the implementation of generic strategies as well as intensive growth strategies. The generic strategy is representing the complete approach that is used by Jaguar for competing in the international market whereas the intensive growth strategy is defining the various actions that are used by Jaguar for ensuring continuous development. The organization’s continuous innovative aspect as well as success is indicating the actualization of these strategic aspects. (Armstrong, 2014) Jaguar has effectively implemented its generic strategies as well as intensive growth strategies in a simultaneous way.
Generic strategy for Jaguar (Porter’s Model)
The generic strategy of Jaguar Car Company is the association of the cost leadership generic strategy as well as the broad differentiation generic strategy. Cost leadership will be entailing the minimization of operational costs as well as selling prices whereas the broad differentiation generic strategy is having the requirement of development of business as well as uniqueness of product for ensuring the competitive advantage regarding Jaguar. The association of these generic strategies will be supporting the international reach of Jaguar in every segment of the market. A strategic objective in respect of the generic strategy of Jaguar is minimization of cost of production for attaining cost leadership. Jaguar Car Company is doing that with the assistance of Just-in-Time process of manufacturing. This process is addressing the generic strategy of Jaguar through the minimization of waste, cost of inventory, as well as response time. (Cox, 2014) Due to this, Jaguar has been able to actualize optimum productivity in business. Moreover, the company is having the strategic objective to innovate for addressing the wide element for differentiation regarding its generic strategy.
Intensive strategy for Jaguar (Intensive Growth strategy
- Market Penetration – The major intensive growth strategy for Jaguar is market penetration. This intensive strategy is supporting the growth of business by reaching as well as attracting increasing number of customers in the present markets of Jaguar Car Company. For fulfilling this intensive strategy for growth, Jaguar makes sure that it will be offering products in respect of all the segments of the market. (Jenkins, 2011)
- Product Development – Jaguar is using product development as its next intensive growth strategy that assists the growth of Jaguar through the attraction of customers regarding new products. Jaguar Car Company is using this intensive growth strategy for innovating rapidly. The organization is well known regarding its processes of innovation. (Iqbal, 2011)
- Market Development – Jaguar is already having its existence internationally. Therefore, market develop is only to support intensive growth strategy in respect of the business. Growth of Jaguar takes place through the entry into new markets or conducting sales to new segments of the market.
Assess the external and internal environment of an organization.
For assessing the external environment for Jaguar Car Company let us undertake a PESTEL analysis as well as to analyze the competitive advantage for the organization let us undertake the Five Forces analysis.
Pestel Analysis for Jaguar
- Political factors (P)– These factors are associated with strong tax incentives in respect of inbound investors, strong political motivation in respect of globalization as well as strong reputation as well as trust. This factor is also associated with an adaptive legislative framework
- Economic factors (E) - This factor comprises of the recovery of the economy as well as growth in the market in respect of luxury cars. There is a strong export base as well as strong links associated with infrastructure. There exists a competitive labor cost model, possessing a highly mobile work force as well as adaptive investment authority in respect of technological investments for Jaguar. (Hohpe, 2012)
- Social factors (S) – There are a strong science and education culture, strong culture of management as well as adaptive English speaking population. There is also the inclusion of brand identity as well as trends in the market. Jaguar is having its own brand identity and is continuously innovating itself.
- Technological factors (T) – This factor is associated with having a strong culture as well as facilities regarding research and development. Jaguar is having strong tie-ups with western technological organizations and the company is adaptive to new technologies. (Hohpe, 2012) The company has also made a strong investment in research and development and also integrating different innovations within their cars.
- Legal factors (L) – Jaguar is having the scope towards providing products of higher quality that will be satisfying or exceeding needs that are depending on environmental laws. Moreover, the organization can offer products that are safe as well as satisfactory for fulfilling or exceeding the consumer laws. (Griffin, 2015)
- Environmental factors (E) – Jaguar is having the scope towards providing products that are more environmentally friendly like electric cars or cars having better fuel efficiency. Jaguar Car Company is also having the scope for increasing its sustainable performance by improving its effectiveness regarding the process of business.
Five Forces Analysis for Jaguar
- Competitive Rivalry: The automobile organizations are highly competitive in respect of factors like innovation as well as marketing. Moreover, Jaguar is competing with high variety of organizations that are differentiating via cost, electronics, fuel efficiency, style, image of the brand as well as other variables. In spite of that, Jaguar is competing with a limited number of large establishments showcasing the fact that the organization is having comprehensive strategic aspects for addressing the strong force regarding competitive rivalry.
- Bargaining Power of Buyers: There exist low switching costs stating that customers can shift from Jaguar to the competing organizations without any additional cost. This changing aspect occurs when customers are purchasing a new car. Moreover, the customer’s of Jaguar can select the best alternative without any problem since they are having accessibility to information that is accurate like the information of product from the website of the organization. Jaguar is required making sure that its products will be matching the target customer’s likings as well as expectations. (Griffin, 2015)
- Bargaining Power of Suppliers: As there exists a limited number of suppliers, therefore a moderate force is created influencing Jaguar. Most of the suppliers regarding the international automotive industry are not possessing forward integration or ownership as well as control regarding material distribution that reaches organizations such as Jaguar.
- Threat of Substitutes: The substitutes will be affecting the business of Jaguar through their competition with the products of the organization. This element will be determining the impact that the substitute products will be having. The external factors such as low switching costs, moderate availability of substitutes as well as low convenience in using substitutes in the environment regarding automobile industry are the major providers regarding threat of substitution. (Lind, 2014)
- Threat of New Entrants: Jaguar is facing a very weak threat regarding new entry. The high establishment costs, maintenance and growth of a new organization in the automobile industry are considered as essential barriers to entry. These hurdles wanes the impact of new entrants on organizations such as Jaguar.
For assessing the internal environment for Jaguar Car Company let us undertake a SWOT analysis
SWOT Analysis for Jaguar
- Strengths (S) – The strengths are associated with the present operations regarding research and development as well as maintaining a strong identity as well as reputation regarding the brand. There is the presence of high product quality, rich cultural identity as well as strong international brand value. The company is having a popular image regarding luxury brand and there has been a growth in international sales after the company was acquired by Tata Motors.
- Weaknesses (W) – The Company is lacking in diverse range of products in comparison to its competitors. In spite of having cars delivering high performance, the designing of the cars faces criticism. Post the acquisition of the organization by Tata Motors, cost cutting gave rise to issues regarding labor union. The portfolio of product is small and narrow. (Lancaster, 2010)
- Opportunities (O) – There is huge business prospect in economies that are emerging such as India, China, Russia other than Europe and the US. Also, hybrid models regarding luxury cars are considered to be the market which is unexploited. Therefore, there is an opportunity for economic growth as well as expansion of market.
- Threats (T) – There are threat of strong competition from the global automobile brands, there is also the reliance on the policies of the government as well as increasing prices for fuels. Moreover, financial unsteadiness has caused sharp fall in the category of premium cars. (Lind, 2014)
This section has discussed about various aspects that delved with the current strategic issues that are faced by the automobile industry as well as the major trends that will be affecting the industry segment in the anticipated future. In this respect, the business environment of Jaguar has been analyzed taking into consideration the market details of the company.
This External and internal environment Assignment delves with the aspect of strategic management for the organization Jaguar. For assessing the external environment for the car company a PESTEL analysis have been conducted that is comprising of the political factors, economical factors, social factors, technological factors, legal factors as well as environmental factors. Also, for explaining the competitive advantage for the company, five forces analysis has been made that constitutes of Competitive Rivalry, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitutes as well as Threat of New Entrants. Moreover, in respect of explaining the external environment for Jaguar, SWOT analysis has been conducted that is associated with the strengths, weaknesses, opportunities as well as threats regarding the company.
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