Automobile industry has a long history, since 19th century it has been continuously developed. The auto industry is often thought of as one of the most global of all industries. Its products have spread around the world, and it is dominated by a small number of companies with worldwide recognition. In this assignment I am going to discuss Morgan Motor company’s strategic position which includes: marketing position, culture of the company, competitiveness and the future development.
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Profile of the Company
The Morgan Motor Company is unique in building cars in England since 1909 and still being privately owned by the Morgan family. Indeed in its 100-year existence only three Morgans have headed the company. Since the first four-wheeled car in 1936 the factory has only built sports cars. The traditional Morgan is still being built using the separate steel chassis, with an ash body frame panelled in aluminium, but using excellent modern drive trains from Ford. This combines the pleasure of driving a real classic with a modern day performance and new car reliability.
The launch of the all new Morgan Aero 8 in 2001 was the first all new Model since 1936. It was also an all aluminium super car incorporating the very best of British race car chassis technology in a stunning road car. Powered by a BMW 4.4 V8 the Aeros bonded aluminium chassis followed the Morgan tradition of great strength yet lightweight. Built alongside the traditional cars, the Aero 8 is proving its outstanding competence to a new breed of Morgan owners.
The product market mission
Morgan is unique in a car industry. They consistently keep making the hand- made and ash-framed cars. They don’t have as much customers as other car companies and its niche market is relatively small than others. Their output is also small in comparison with other car brands. Morgan is not trying to change its cars to more modern cars and to increase its production number, this is what gives Morgan its uniqueness. If they start producing more modern cars and increase its output they may loos its uniqueness. This does not mean that Morgan is consistently using the same technology of producing cars as they used to, they are continually improving the quality. Morgan is a niche operator and it does not compete with others. If they moderate their production with increasing the output and produce more modern cars they will face the competition with other car manufacturers. They are always staying at the position they are now and keeping the same strategy, if they keep doing this they will not have many competitors in the market. There are number of approaches to understand the product market mission in deep. I will discuss some of them below.
Porters Generic Strategy
Porter (1980, 1985) suggested that some of the most basic choices faced by companies are essentially the scope of the markets that the company would serve and how the company would compete in the selected markets. Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry (Pearson, 1999). According to Porter, there are three generic strategies that a company can undertake to attain competitive advantage: cost leadership, differentiation, and focus.
Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market.
In Porter’s Generic Strategy model Morgan Motors can be placed in differentiation focus, because Morgan cars price is quite high so it can not follow the cost leadership strategy, they are not selling their product in a standard market price. Morgan do deliver high quality product and service, their cars are unique in car industry market, as already mentioned above, Morgan is the oldest hand-made car manufacturer. The company concentrates on a particular niche market and is different from other mass production car manufacturers.
Parnell suggested that valuable resource is more important for the company than cost leadership and differentiation. He believed that valuable resources could help the company to achieve more success. He said that if company can have inimitable, rare and valuable resources it could help the company to gain the competitive advantage. Organizations possessing rare, valuable and inimitable resources possess a greater capability to perform a strong value proposition than those without such resources (Parnell, 2006)
In case of Morgan the idea of Parnell can be aplicable because Morgan uses valuable resources and they are inimitable. What are their valuable resources and what makes them to be inimitable will be discused after.
The “strategy clock” is another appropriate way to analyze a company’s competitive position to cost or differentiation advantages (Bowman & Faulkner, 1996).
The strategy clock uses differentiation and focused differentiation in a similar manner to that of the generic strategy model.
As it is already explained above in Porter’s Generic Strategy Morgan Motors in Strategy Clock takes the same place which is the focused differentiation. Morgan Motors product price is high and the market niche is relatively small it concentrates on particular niche market. Customers perceived value is also high.
A model that allows the discussion of competitive strategy from both market and resource perspectives has been described by Jenkins (2004). A framework is proposed in which products/services are described by three variables:
- Relative level of consumer perceived product benefits
- Relative product price to the customer
- Relative product cost to the producer
If we compare the cube with porters generic strategy and strategy clock point A in the cube is similar to Differentiation Focus in above mentioned models, which means that the companies which are placed in this point has got high price, high benefits, particular market niche. The point E is similar to Cost Focus in Porters generic strategy and it is similar to 1 and 2 positions in strategic clock. In the case of Morgan Motors Company in this model it is positioned in a point A because of its high cost, high perceived benefits, low market niche and high price.
The Cultural Web, which I will discuss below will help us to understand the Company’s culture. The Cultural Web identifies six interrelated elements that help to make up what Johnson and Scholes call the “paradigm” – the pattern or model – of the work environment. By analyzing the factors in each, the companies can begin to see the bigger picture of their culture: what is working, what isn’t working, and what needs to be changed. The six elements are:
- Rituals and Routines
- Organizational Structure
- Control Systems
- Power Structures
Company has been owned by Morgan family since it has been established. Company has about 150 employees. The managers seat together with the employees on a traditional tea break and talk with them, this is the way to know better all employees and share their thoughts. For the Company it is very important to have high skilled staff. Company is situated at the same place as it was since it has been established, most of the employees have worked for the Company for more than ten years, mainly the employees are from the same area and moreover they are from the same family. All the employees have a very close relationship with each other. All this makes the Company to have a different culture from other manufacturers.
The activities and the resources of the Company
Value chain analyses
The value chain framework of Porter (1990) is “an interdependent system or network of activities, connected by linkages”. When the system is managed carefully, the linkages can be a vital source of competitive advantage (Pathania-Jain, 2001). In order to conduct the value chain analysis, the company is split into primary and support activities. The primary and secondary activities of the firm are discussed in detail below.
The primary activities (Porter, 1985) of the company include the following:
- Inbound logistics
These are the activities concerned with receiving the materials from suppliers, storing these externally sourced materials, and handling them within the firm. Morgan is using high standard and high quality materials. Morgan always keep improving their quality and they are continuing using the aluminium and recently they bought the BMW’s engine to make their cars better and faster.
These are the activities related to the production of products and services. Morgan cars since the Company has established are made by hand with ash-frame. This is what makes Morgan cars so special and valuable. All Morgan cars are different from each other, they are made according the taste of the customer. Comparing to other car manufacturers, to produce Morgan cars takes much longer time, but this doesn’t make to shorten their customer waiting list and people are still keen to get Morgan car which can be made according to their taste.
- Outbound logistics
These are all the activities concerned with distributing the final product and/or service to the customers. As it is already described above, because of Morgan car is made by hand, it takes much longer time than other car manufacturers. The waiting time till Morgan car is finished is between one and two years, but sometimes it takes much longer to collect the car to its final face. Morgan has only one plant, but it has dealers all over the world what makes much easier for the customers to get their car more conveniently.
- Marketing and sales
This functional area essentially analyses the needs and wants of customers and is responsible for creating awareness among the target audience of the company about the firm’s products and services. Morgan Company doesn’t do many marketing activities. For many people the brand still can be unknown. It is because of its low productivity, but their uniqueness and brand still brings them enough customers. It is obvious from their waiting list. Demand is much higher than supply.
There is often a need to provide services like pre-installation or after-sales service before or after the sale of the product or service.
The support activities of a company include the following:
This function is responsible for purchasing the materials that are necessary for the company’s operations.
- Human Resource Management
This is a function concerned with recruiting, training, motivating and rewarding the workforce of the company. For Morgan well trained and high skilled employees are very important as it is for many Companies. As in many Companies Morgan also has the training programs to develop their employee skills. As above mentioned there are around 150 employees in Morgan Company and all of them are in a good relationship with each other. The heads of the Company is also trying to have a good relationship with each of their staff member and to share their thoughts with each other.
- Technology Development
This is an area that is concerned with technological innovation, training and knowledge that is crucial for most companies today in order to survive. Morgan consistently is improving their product and technologies. For example: launching the Aero 8 model, and purchasing the BMW’s engine to make their cars much comfortable and faster.
- Firm Infrastructure
This includes planning and control systems, such as finance, accounting, and corporate strategy etc. (Lynch, 2003).
The value chain should be analysed with the core competence of the company at its very heart (Macmillan et al, 2003).
Resource Based View
The resource-based view theory is based on the assumption that a competitive advantage is the result of optimal resource allocation and combination in imperfect markets. Resources are assets, skills, and capabilities. The resources leading to competitive advantages have to be scarce, valuable, non substitutable and it has to be hard to imitate them (Barney, 1991). In case of Morgan, the resources they are using are very special, high quality and valuable. They pay very big attention of the quality they are producing, using high quality materials to produce cars. The Morgan car has always been built around an ash-frame, and a steel chassis. The new Aero 8 also has an ash frame. This gives unique strength, flexibility and surprisingly, research showed that the frame made the car safer on impact tests. There are approx 50,000 colours to choose from. There are many things that makes Morgan cars so special. It’s uniqueness in a world of look-alike cars. Its handmade quality the use of wood in many areas of construction – long standingÂ ‘hands-on’ craftsmanship displayed in the bodywork and interior by the highly skilled workforce. Ability to tailor a model to the customer’s exact requirements. Most of the components of Morgan cars are made in-house. All this gives to Morgan to be inimitable.
Given that almost anything a firm possesses can be considered a resource or capability how should you attempt to narrow down the ones that explain why firm performance differs? In order to lead to a sustainable competitive advantage a resource or capability should be Valuable, Rare, Inimitable, and Organized.
Materials (Ash tree) 1. Limited edition
Reputation 2. Rare materials
Craft skill 3. Design
High experienced workers 4. Unique cars
5. Choice of colour
Skilled workers 1. Strategy
Design 2. Tea break
Materials 3. Friendly atmosphere
The competitive context of the Company
The ideas and models which emerged during the period from 1979 to the mid-1980s (Porter, 1998) were based on the idea that competitive advantage came from the ability to earn a return on investment that was better than the average for the industry sector (Thurlby, 1998).
The original competitive forces model, as proposed by Porter (1998), identified five forces which would impact on an organization’s behaviour in a competitive market. These include the following:
- The rivalry between existing sellers in the market.
- The power exerted by the customers in the market.
- The impact of the suppliers on the sellers.
- The potential threat of new sellers entering the market.
- The threat of substitute products becoming available in the market.
Understanding the nature of each of these forces gives organizations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market (Thurlby, 1998).
- Force 1: The Degree of Rivalry.
- Force 2: The Threat of Entry.
- Force 3: The Threat of Substitutes.
- Force 4: Buyer Power.
- Force 5: Supplier Power.
The rivalry in global automotive industry is very intense. However in the case of Morgan Motors, the Company is very unique and only the one in automotive industry with its old fashioned hand made cars. Morgan doesn’t have competitors and there is no rivalry between Morgan Motors and other car manufacturers. There is no substitute of Morgan cars. The threat of substitutes to the automotive industry is quite mild, numerous of other car manufacturers are competing with each other in the global car industry, but none of them offer the same kind of cars as Morgan does. None of them can offer to customers the hand- made, with an ash body frame panelled in aluminium, the classic old fashioned and herewith modern car, which can be made with the taste of customer. Entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents position (Porter, 1980b; Sanderson, 1998). In the case of Morgan as I have already mentioned before it has a long history with its unique production, the Company has already obtained a solid position on the market and from my point of view it will be hard and not feasible for new entrants to replicate them.
PESTEL Analyses help organizations to analyse factors such as tax changes, new laws, trade barriers, demographic change and government policy changes. PESTEL stands for: Political, Economic, Social, Technological, Environmental, and Legal. PESTEL analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations (Kotler, 1998). PESTEL analyses also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985).
Typical PESTEL factors to consider include:
e.g. international trade, taxation policy
e.g. interest rates, exchange rates, national income, inflation, unemployment
e.g. ageing population, attitudes to work, income distribution
e.g. innovation, new product development, rate of technological obsolescence
e.g. global warming, environmental issues
e.g. competition law, health and safety, employment law
Applying PESTEL to Morgan Motors
Political: Political decisions can impact on many vital areas for business, but in case of Morgan the political factor does not impact on the company’s environment.
Product Life Cycle
The typical Product Life Cycle consists of five main aspects.
- Product development
The Product Life Cycle begins with product development, during which time the firm devises and creates a new product (Kotler and Armstrong, 2004). The introduction of a new product onto the market is typically characterised by very slow sales, which may grow only very slightly over a long period of time. (Porter, 1980; 1985; Kotler et al., 1996; Blackwell et al., 2001; Grant, 2002; Kotler and Armstrong, 2004). The growth stage in the PLC typically involves a rapid growth in sales as early adopters replace pioneers as the main consumer group.Â
The maturity stage in the PLC is a key point for a firm because it marks the turning point in the product’s success.Â Morgan Motor Company in Product Life Cycle takes Maturity stage.
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