Jaguar impressive car manufacturers

UK car market

The UK car market offers an impressive range of car manufactures. “The volume car producersthat manufacture in the UK are BMW (MINI, Rolls Royce),Tata Motors (Jaguar, Land Rover), GM (Vauxhall/Opel), Honda, Nissan, Toyota and VW (Bentley)[i]”. In 2008 1,446,619 cars were produced, from which 78% were intended for export (fig. 5). Annual turnover[1] in overseas sales generates more than £23bn making automotive the UK's biggest manufacturing export sector. Unfortunately, recent years saw a steady decline in volume sales of new cars to private individuals. Moreover, Mintel[2] forecasts bad news for auto dealers: “From 2008-13 we expect the market to grow and decline by one percent. Without the effects of inflation on motoring this equates to a drop of 10%”[ii] (fig. 1).

Car manufacturing is a mature and in general profitable business. However this also imposes significant entry barriers for newcomers, as it requires heavy investments and significant resources (open suppliers of raw materials) as well as some technological experience. New entrants will also have to face strong competition for each segment of the market.

Jaguar – company profile and strategies

Jaguar was founded in 1922 by two motorcycle enthusiasts; William Lyons and William Walmsley. The company was producing motorcyclesidecars but soon switched to passenger cars. The original name, Swallow Sidecar was changed after World War II due to the bad reputation of the SS initials. In 1966 Jaguar merged with theBritish Motor Corporation[3](BMC) and Leyland (which had already taken overRoverandStandard Triumph) to become in 1975 British Leyland Ltd. In 1985 Jaguar was first listed on theLondon Stock Exchangeand became a constituent of theFTSE 100 Index[4]until 1989 when it was acquired byFord[iii]. In March 2008 Tata Motors, an Indian corporation, bought Jaguar and Land Rover from Ford for US$2.3bn. In agreement, Ford took responsibility to continue supporting Jaguar with necessary technology, powertrains and future products[iv].

In the UK, as well as in the rest of the world, Jaguar is known for its leading luxury cars. “The company offers a wide product range including a line of luxury convertibles, coupes and sedans such as the S type, XJ, XK and the X type”[v]. Currently it holds 4th position in the UK market share after GM, Honda and BMW with an annual turnover of £3,397,000, typical for such industries (fig. 3 & 6). On a global format the company operates in a quite niche market as their products have a small consumer base. This is especially true for executive and luxury segment which accounts for less than 11,000 cars sold annually in UK (fig. 2). To reduce this handicap, Jaguar has incorporated some new strategies which will be best explained in the form of a SWAT[5] analysis:

Strengths:

Jaguar is a leading brand in its segment of luxury sedans and sports cars. Many company's vehicles have won prestigious awards and public acceptance making Jaguar an instantly recognizable icon (e.g. double win Top Gear magazine awards, XF – best interior of the year and best executive car in 2009 from WhatCar? Magazine, 2009 fleet world honors, etc). Such award-wining[6] features as Jaguar Sequential ShiftTM, Jaguardrive SelectorTM, Jaguardrive ControlTM give an unique selling point[7] over the most competitors[vi]. The company also has a strong technological base, with big investments in R&D. Since Ford ownership (1989 – 2008) Jaguar took advantage of some economies of scale[8] improving its production and distribution techniques.

Weaknesses:

Although Jaguar cars are quite popular in UK, this is not the case for the rest of the world. The company is struggling to compete for the market share in Europe, Asia and North America with such rivals as BMW 3 and 7 series, Mercedes, Audi and Porsche. Moreover, the company is losing US market with its sales declining continuously: “In 2008, Jaguar recalled 7918 2009 XF sedans because of a problem with the rear seatbelt assembly. The company also recalled 2003/04 XJ model cars to rectify an issue with the abrasion of corrosion protection on under floor brake pipes through contact with a sound deadening pad in August 2009”[vii].

Opportunities:

In its search to increase sales and market share Jaguar has targeted new markets like Canada, where it decided to introduce the newest model from the XF series, the 2010 Jaguar XF Supercharged. Moreover, the company is expanding its presence in the Chinese and Indian markets, one of the fastest growing car markets at the moment. Jaguar also remained committed in its scopes to reduce the CO2 emissions and energy consumption per vehicle as well as to continue to invest in technological innovations.

Threats:

About half of Jaguars products are intended for export. Because of this, the company is quite dependable upon currency fluctuations that can put it in a disadvantage among global competitors. For example; a strong British Pound (£) in relation to a weak Euro (€) or Yen (¥) might lower sales or weaken company's financial position on European and Chinese markets. Also, such factors as changing prices on oil fuel and raw materials can only have an adverse impact on company's profits. Another threat is coming from the 2010 EU standards for car manufactures. The new legislation might become a heavy financial burden if the company fails to reduce CO2 emissions per vehicle[viii].

To better understand the Jaguar's profile and its products let's look at the firm's newest car model, analyzed from the perspective of the 4Ps[9] of marketing mix:

Product:

The all new Jaguar XJ (X351) was first introduced at a ceremony at the LondonSaatchi Galleryon 9 July 2009. It is luxury passenger car with a 4 door saloon and 6-speed automatic transmission that comes with two wheelbases and five trim levels[ix]. The customer has the option to choose from 4 model specifications (XJ Luxury, XJ Premium Luxury, XJ Portfolio and XJ Supersport) and 3 engine capabilities (5.0L385PS, 5.0L510PSsupercharged and the 3.0L275PS V6Diesel) as well as many other features. The car has a brand new exterior design, much different from the traditional shapes and lines of older versions with improved dynamics and sustainability. Customers also beneficiate from a 3 year warranty when they buy a new XJ.

Price:

The price ranges substantially depending on model and engine specifications. The cheapest model, the XJ Luxury 3.0 V6 Diesel is available from £53,775.00 (including all taxes), however, the XJ Supersport 5.0 V8 Supercharged can cost as high as £90,455.00[x]. Comparing with the price of other cars from the same luxury class (or S class), for example the Audi A8 reveals that most customers have to pay a premium price for a new XJ (significant pricing gap[10] fig. 4). In most cases this is due to a strong brand loyalty or class association (“only rich people can afford a jaguar”). The company is currently using a Cost Plus Pricing[11] strategy, which also has some impact on final price.

Promotion:

Most of the promotion is done through press releases like Top Gear and What Diesel magazines, publicity events (e.g. Frankfurt and Geneva Motor Shows, Detroit Auto Show) and different kinds of brochures with price-lists and technical specifications. In the recent years increasing publicity is made through internet. WebPages offer reviews and comments on Jaguar cars with lots of photographs and videos. However the most important source of promotion are the dealerships themselves. It is here that Jaguar puts most pressure on customer and persuades him to buy the car. In this case, the intention to buy is fortified with impressive showrooms and special deals (e.g. “Typical 5.9% APR Jaguar Privilege”).

Place:

Jaguar is considered a global company with a strong sales and distribution network around UK and in most countries around the globe. Since 1989, when Jaguar brand was acquired by Ford, it cars sheared common dealerships with Land Rover (mainly in US, Canada and Europe).

Jaguar - competition and profits

Jaguar's present competitors in the global car market include companies with headquarters in Germany (Daimler, BMW and VW) France (Peugeot Citroën and Renault), Italy (Fiat Auto) and US (G M). Among these, major threats oppose brands that operate in the company's luxury and sports car segment. Automobiles like Daimler's Mercedes-Benz (C and S class), BMW's 3'ed and 7'th series, Volkswagen's Audi A4, A8 and Bentley Continental as well as Maserati Quattroporte owned by Fiat Group (fig. 2). Interesting to mention, that majority of car manufacturers operate under subsidiary of a parent company, corporation or automobile group, holding and Jaguar is no exception from the rule (current subsidizer - Tata Motors).

Top five best sellers by segment in UK

Executive class

Luxury class

Model

Registrations

Market Share

Model

Registrations

Market Share

Mercedes-Benz C-Class

26,057

26.40%

Mercedes-Benz S-Class

2,111

21.20%

BMW 5 Series

18,578

18.80%

Audi A8

1,465

14.70%

Audi A6

13,178

13.40%

Bentley Continental

1,370

13.70%

Mercedes-Benz E-Class

8,895

9.00%

BMW 7 Series

1,370

13.70%

Jaguar XF

8,893

9.00%

Jaguar XJ

1,244

12.50%

Segment total - 98,572

Segment total - 9,977

Recent economic crisis and credit crunch forced the global automobile market to a significant decrease in production and sales. According to SMMT[12] in November 2009 the UK car production fell by 34.4% and sales falling by 36.8% which was the biggest drop since 1980 (fig. 5). All over the world car manufacturer counted loses reducing production in most segments. Jaguar by part was affected by this sudden drop. The biggest losses were registered in luxury and sports segment in which Jaguar was mainly performing. In 2008 it posted a loss (after tax) of £41,600 in the 10 months period (June 2008-March 2009). “Jaguar Land Rover sold 167,000 vehicles during the 10 month period (June 2008-March 2009), compared with 246,000 in the same period in the previous year”[xi] (fig. 3). In response, Jaguar adopted an Allocative strategy[13] aligning its production with demand, reducing costs and working capital[14] requirements wherever possible. Competitors also posted losses, but much more significant. For example in the same time period (UK market) GM reported a loss (before tax) of £229,400 along with Bentley which reported a loss (before tax) of £127,600. BMW however, reported for 2008/09 fiscal year a small net profit (before tax) of £98,304 (fig. 6).

In the past years, Jaguar wasn't doing well either. According to Fame[15], since 2001 Jaguar posted significant profit losses with each year (2001-2006) showing decreasing trends in turnover, ROTA[16] and profit margin[17]. The company also had a loss (before tax) of £2,086,200 in the same time period. Finally in 2007 with the appearance of new XF and X-type the company enjoyed a sudden boom in sales with 21.98 % increase in profit margin and 31.95% increase in ROTA accounting for £252,600 profit (before tax). An important notice – these statistics account only for UK sales (fig. 3). Jaguar's overseas sales on contrary saw small but stable profit margins with an 7% increase in ROTA for the same time period (2001-2006)[xii].

In conclusion

Judging from current and available information, it seems that the best option would be to create a new company and to compete with it against Jaguar. Of course, this will require a lot of expenditure and a handful of experienced workers. However, it is also important to consider that, as mentioned earlier, the car market itself is in a declining phase, offering no growth opportunities in the nearest future.

JAGUAR CARS LIMITED

R/O Address :

Abbey Road

Registered No :

01672070

Whitley

Legal Form :

Private Limited

Coventry

West Midlands

R/O Phone :

0247 - 6303080

Date of incorporation :

15/10/1982

R/O Postcode :

CV3 4LF

Accounting Ref.Date :

31/12

Accounts Type :

Full accounts

Company Status :

Active

Web site :

www.jaguar.com

Latest Turnover :

2,104,900 th GBP

Number of Holdings :

2

Latest No of Employees :

7,268

Number of Subsid. :

10


Activities :

Design, development, manufacture and marketing of high performance luxury

saloons and specialist sports cars.

UK SIC (2003) Codes :

Primary Code :

3410 - Manufacture of motor vehicles

All Code(s) :

3410

Standard Peer Group :

3410 - Manufacture of motor vehicles (VL: Very Large Companies)

Main Exchange :

Unlisted

Ticker Symbol :

USED PEER GROUP :Standard PG (current or default)

53 Companies

PROFILE

31/12/2008

31/12/2007

31/12/2006

31/12/2005

12 months

12 months

12 months

12 months

th GBP

th GBP

th GBP

th GBP

Uncons.

Uncons.

Uncons.

Uncons.

UK GAAP

UK GAAP

UK GAAP

UK GAAP

Turnover

2,104,900

1,149,000

1,428,000

1,536,400

Profit (Loss) before Taxation

-41,600

252,600

-258,000

-533,700

Net Tangible Assets (Liab.)

445,100

396,200

110,600

261,900

Shareholders Funds

327,700

233,800

-291,900

-250,600

Profit Margin (%)

-1.98

21.98

-18.07

-34.74

Return on Shareholders Funds (%)

-12.69

108.04

n.s.

n.s.

Return on Capital Employed (%)

-5.80

63.76

-233.27

-203.78

Liquidity Ratio

0.30

1.07

0.66

0.80

Gearing Ratio (%)

121.09

111.25

n.s.

n.s.

Number of Employees

7,268

7,218

7,583

8,810


PROFILE

31/12/2004

31/12/2003

31/12/2002

31/12/2001

12 months

12 months

12 months

12 months

th GBP

th GBP

th GBP

th GBP

Uncons.

Uncons.

Uncons.

Uncons.

UK GAAP

UK GAAP

UK GAAP

UK GAAP

Turnover

1,869,300

2,432,000

2,168,900

2,464,600

Profit (Loss) before Taxation

-429,300

-601,100

-321,800

-51,700

Net Tangible Assets (Liab.)

-544,500

-47,700

318,700

629,900

Shareholders Funds

-748,800

-322,300

18,600

340,400

Profit Margin (%)

-22.97

-24.72

-14.84

-2.10

Return on Shareholders Funds (%)

n.s.

n.s.

n.s.

-15.19

Return on Capital Employed (%)

78.84

n.s.

-100.97

-8.21

Liquidity Ratio

0.16

0.21

0.41

0.78

Gearing Ratio (%)

n.s.

n.s.

5,156.99

234.58

Number of Employees

9,618

7,615

7,656

7,589

Model

Technical specifications

Base price (on road)

2009 Jaguar XJ Luxury

3.0L, V6 Diesel

£53,775.00

2009 Audi A8

4.2L, V8

£46,230.00

2008 BMW 750i

4.4L, V8 Turbo

£47,003.58

2009 Mercedes-Benz S350

3.0L, V6

£57,103.16

2009 Maserati Quattroporte

4.7 L, V8

£73,791.90

Year

Car produced

Rate of change (%)

2006

1,442,085

-9.70%

2007

1,534,567

+6.40%

2008

1,446,619

-5.70%

(November)2009

914,117

-34.40%

BALANCE SHEET AND P/L ACCOUNTS ITEMS

Company Name

Year

Turnover
th GBP

Profit (Loss) before Taxation
th GBP

Net Tangible Assets (Liab.)
th GBP

Median

LY

1,332,300

12,500

164,600

GENERALMOTORSUKLIMITED

2008

3,497,300

1

-229,400

11

-479,900

11

HONDAOFTHEU.K.MANUFACTURINGLIMITED

2008

2,724,136

2

10,405

7

519,520

2

BMW(UK)MANUFACTURINGLIMITED

2008

2,690,768

3

98,304

1

860,225

1

JAGUARCARSLIMITED

2008

2,104,900

4

-41,600

8

445,100

3

TOYOTAMOTORMANUFACTURING(UK)LIMITED

2009

2,027,243

5

-192,492

10

218,094

4

PEUGEOTMOTORCOMPANYPLC

2008

1,332,300

6

12,500

6

164,600

6

LEYLANDTRUCKSLIMITED

2008

885,003

7

25,195

3

127,680

8

IBCVEHICLESLIMITED

2008

847,770

8

27,282

2

61,091

10

BENTLEYMOTORSLIMITED

2008

829,400

9

-127,600

9

158,400

7

ASTONMARTINLAGONDALIMITED

2008

536,571

10

22,634

4

206,607

5

VOLVOGROUPUKLIMITED

2008

395,103

11

14,487

5

122,383

Reference:

[i] New car market, retrieved January 3, 2010, from SMMT official webpage: http://www.smmt.co.uk/industryissues/index.cfm?catid=3725&sid=259&iicatid=L_1003&maincatid=913.

[ii] “Car Retailing UK - August 2008”, retrieved January 5, 2010, from Mintel Orange database: (http://academic.mintel.com/sinatra/oxygen academic/search_results/show&/display/id=280612.

[iii] Jaguar Cars Ltd. History, retrieved January 5, 2010 from Wikipedia webpage: http://en.wikipedia.org/wiki/Jaguar_Cars.

[iv] Tata Motors official website, retrieved January 5, 2010; http://www.tatamotors.com/search/search.php?q=jaguar+cars&search=Search.

[v] Jaguar Cars: 2009 company profile edition 3: Chapter 10 Prospects.(1 December).Just - Auto:Jaguar Cars: 2009 company profile edition 3,18.Retrieved January 12, 2010, from ABI/INFORM Global.

[vi] “Driving Dynamics features”, retrieved January 12, 2010, from Jaguar official webpage. http://www.jaguar.com/gb/en/#/new_xj/models/features/driving_dynamics.

[vii] Jaguar Cars: 2009 company profile edition 3: Chapter 6 SWOT analysis.(1December).Just - Auto:Jaguar Cars: 2009 company profile edition 3,13-14. Retrieved January 12, 2010, from ABI/INFORM Global.

[viii] “EU legislation on CO2 emissions”, retrieved January 13, 2010 from Environmental Commission official web source: http://ec.europa.eu/environment/air/transport/co2/co2_home.htm.

[ix] Jaguar Mark 4 X351 (2009-) car history, retrieved January 13, 2010, from Wikipedia webpage: http://en.wikipedia.org/wiki/Jaguar_XJ.

[x] “The all new XJ price list January 2010” brochure, Printed in England JLM/10/03/34/0110.

[xi] Jaguar Cars: 2009 company profile edition 3: Chapter 3 Financial analysis.(1December).Just - Auto:Jaguar Cars: 2009 company profile edition 3,4-5.Retrieved January 15, 2010, from ABI/INFORM Global.

[xii]Jaguar Cars Ltd. Financial report retrieved January 15, 2010, from FAME database: https://fame.bvdep.com/version2010113/cgi/template.dll.

 

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