The Automotive Industry Morgan Motors Marketing Essay

Published Date: 23 Mar 2015

Introduction

Automotive industry is world's biggest industry, now everyone depends on that directly or indirectly. Cars are status of symbol before last decade but now image is change now middle class person can afford a car for his family. Every time in recession automotive industry has to suffer a lot because of its cost. New automotive industries are now targeting developing countries like India, China etc… they design car according to their need. Most of company have now manufacturing unit in respective countries so; they get Government benefit and also come to know local demand of automotive industry. Recent period of recession all major players has to suffer a lot and out of that GM, Chrysler like big player has bankrupt themselves. Morgan British based car manufacturing company has just finished its 100 years during that it seen so many financial crisis, still its came out of it with same image as 100years before. Morgan name remain same because of its unique design and range of Hand made cars. One side luxury cars like Morgan are available in market while on other side TATA Indian Company had launched NANO for middle man cheapest car in the world.

Part 1:

Porter's generic strategy:

Porter's generic strategy model is as (Figure 1, Appendix 1.1)

Porter's generic model is the main model to explain and understand Competitive advantage for any industry. Porter divided this in four sections. Achieve competitive advantage firm has to decide which way they can get competitive advantage and which is based on firm's resources and capabilities.

Cost leadership

Cost leadership is the indeed the clearest of the three generics strategies. Firm has to decide whether they want to be a low cost produce in the respective industry. The sources of the cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of the scale, proprietary technology, preferential access to raw material, and other factors. Cost leadership require low level of labour, and efficient training procedure because of high turnover. Cost leadership industries might have sale low cost product or no frills.

Firm acquire cost advantages are by improving process efficiencies, gaining unique access to large sources of lower cost materials as per Porter's.

Decision of making maximum out sourcing and own quite a few things by firm or avoiding similar costs altogether. Due to all this if competing firm is unable to lower their costs by a similar amount they firm may be able to sustain a competitive advantage based on cost leadership.

Differentiation;

They second strategy if differentiation, in this firm seeks to be unique by some dimension that convince buyer to buy it from firm. Firm has to something different from other competitor. Differentiation can be different depend up on industry itself. Differentiation can be different in production, raw material, and marketing skill or other of the particular industry. Only above average performer of the particular industry can be at stage of differentiation.

Focus:

The third and last generic strategy is focus, which is unique. The firm which have something unique and on that bases it get competitive advantage comes in this section of porter's model. Industry or firm has something which is totally different from other and which is not imitable by other or the cost of imitate is higher. Advantage of the Focus is that company can charge premium price to the customer because they don't have much substitutes available. Limitation of the Focus is that the number o customer are very less, compare to other generic strategy. This can be achieved by only few companies in their respective field, which also is focus differentiation.

Morgan motor is at the focus differentiation because of its craftsmanship, and particular raw material like ash wood frame, colour variety of the car. Morgan cars are also very expensive.

British based company of TATA group Range Rover at low cost because they are producing mass car every year, they are also available at affordable range compare to other cars like Morgan, BMW, Jaguar etc… since they start their they concentrate on mass production and through that they are at low cost competitive advantage. Jaguar is also British based TATA group car but they are at differentiation. Jaguar producing world's saloon and luxury cars since 1992. X-type, XF, XJ are also luxury models of Jaguar.

Toyota is the company which we can divide in to all three because of its different model, Toyota started from low cost in 1937 with Toyota AA, and then after they change their strategy and produce different model and travel through differentiation and focus as well. Toyota's most expensive car was Toyota Land Cruiser most expensive in 2009

The strategy clock: strategy clock as (Figure 2, Appendix 1.2)

After Michael Porter's generic model, bowman makes some changes and divide firm in to further categories. Bowman put all data on graph and explains that, the company has low price and low added value are at no frills. They further up when company price is low and perceived added value is high compare to no frills they are at second stage. High perceived value but slight high value firm are at hybrid; these firms are low cost base and reinvestment in low price and differentiation. Now when the profit margin goes up the firm have started to show some difference in product so they can target particular segment of buyer.

Focus differentiation is the extreme where firm can charge premium price to its premium customer, indeed company provide them particular service through marketing, raw material or different from other in same industries. Then in increase price/standard value after company don't have any extraordinary service but company charge higher to customer and company lose market share. Increase price and low value can only be feasible in monopoly situation where no other competitors are in marker. Low value/ standard price shows loss of market share.

Morgan motors are at the Focus differentiation from very beginning of its history because they are providing same quality of customer satisfaction and quality to its niche customer. During the 100 years of history Morgan hasn't change its policy. They are providing luxury handmade cars.

Toyota started from no frills in 1937 with Toyota AA which was design with basic features. Then after it's also jump in to military transportation vehicle and during time its design both luxury cars and commercial vehicle and through that it travel through no frill of the clock to focus differentiation of Bowman clock with its luxury range of Lexus.

TATA group's British based company Jaguar is at differentiation while Range Rover at the Low cost vehicle is at Low cost of strategy clock.

The strategy cube:

Strategy cube model as (Figure 3, Appendix 1.2)

Porter's and Bowman's model miss out the discussion of product price and product cost and perceived level of product benefits are discuss in Jenkins strategic cube. Strategic cube argue that an appropriate way to understand the competitive behaviour of the firms is to use intensive studies. Through Jenkins strategic cube it's easy to explain is company have more than one product, out of those which are performing well. In the cube different small cube can easily explain performance of the different product of the same company.

High level of all consider as Differentiate strategy of the firm.

Ideas of Parnell:

A reconceptulization of competitive strategy: Reconceptulization occurs in porter's generic strategy on the basis of the value dimension and the market control dimension.

The value dimension; Low cost and differentiation is through the lens of value, define herein as the relation between product perceived worth and its price. The idea value proposition is one whereby buyer perceives a firm's products or service to be of higher quality and lower price. Whereas lower price and often linked to a lower cost position associated with modest or quality.

The Market control dimension; Parnell idea base on that the organization can exhibit three types of market control:

Control over market access available to prospective competitors

Control over suppliers.

Control over customer access to competitors.

Part 2:

Resources and Capabilities;

Combination of tangibles and intangible assets of which control by the firm and it can be used for conceive of execute its strategy (Jenkins, 2009). Resources include a so many things in it like Morgan Factories, its products like Aero8 as tangible assets of the firm, while firm's reputation among customers, team work among managers these all consider as intangible assets of the firm under resources.

Capabilities are the subset of the resources like how company take advantage of its resources whether tangible or intangible. Capabilities alone enable firm to envisage and implement strategy in to the company. This is the relation between resources and capabilities of the firm's. (Figure 1, appendix 2.1)

Strategy is concerned with matching firm's resources and capabilities to the opportunities that arise in the external environment (Grant, 2005).

Value chain analysis of the Morgan Motor Company: Resources and capabilities of the firm can be identifying by this model.

Value chain analysis concept first develop by Michael porter in 1980s, main concept of value chain can be utilised t develop an operational sustainable competitive advantage in business arena as per Michael porter. All organisation consist of activities that links together to expand value of business. And together this activities form the organisation's value chain. Such kind of activities may include purchasing activities, manufacturing, distribution of the products and activities (Lynch, 2003). (Figure 2, Appendix 2.2)

Value chain analysis is the powerful tool for the author to identify the key activities within Morgan motor and which form the value chain for organisation, and have potential of sustainable competitive advantage for the Morgan motor

The value chain framework of Porter (1990) is "an interdependent system or network of activities, connected by linkages" (p.41). When the system is managed carefully, the linkages can be a vital source of competitive advantage (Pathania-Jain, 2001).

Value chain analysis is the potential way of identify valuable resources and capabilities of the firm's. A value chain of the firm's is the set of business activities in which it engages to develop, produce and market its products or services. Each and every steps of the value chain analysis requires the application and integration of different resources and capabilities. Above models divided in to two parts with support activities and Primary activities to explain Value chain of Morgan motor.

Primary Activities:

Inbound logistics: As Morgan is very well known for its sports car manufacturing since one century. Morgan car are made so many different models but the recent Aero8 is the most lightweight of Morgan car range. Morgan use advance laser cut aluminium chassis technology; they use aluminium for frame of the motor which give hard structure. Cockpit of the Morgan car made up of English Ash wood for perfect structure, and flexibility of the car and energy absorption. Light weight suspension for safety. BMW made v8 powerful and lightest engine.

Operation:

Different operation carried out in different production unit. Morgan motors are Handmade and they are unique, every car is unique because of the material they use, ash wood. Their production of Aero8 tub is in Radshape manufacturing unit with special aluminium import from Germany. Engine fit in Morgan chassis assembly unit which is BMW v8 engine.

Outbound Logistic:

All Morgan once made then send it to different wholesaler, as Morgan car are like tailor made its not available new in market directly. Buyer has to wait for around one year to get it. There are quite a few listed wholesaler are there from where a buyer can buy this cars.

Marketing and sales:

As a Morgan is very well know since a century, and it's different car special design for niche customer Morgan do very less marketing. Morgan and other company like Polo, Hub lot Watch Company from Geneva made special collection for Morgan motor company. Cloths, pens, other gifts are available for marketing and sale on Morgan motor company website directly.

Services:

Services are like after sale service or other promotional services which Morgan provides like other company.

Support activities:

Support activities of the Morgan motor company for value chain analysis is as follow.

Procurement:

Support activities of Value chain analysis internal section procurement have analysis of firm's analysis of purchasing of the material necessary for the company's operation like raw material, tools, etc… Morgan motor buy its aluminium from Germany which are chemically coated which not last for more than 6 months so, Morgan cant over stock that material. Ash wood is special English which Morgan gets it from British company. Morgan is very concern for their basic raw material, which saws its image as 100 years before in automotive industry.

Human Resource Management:

Morgan sustains its competitive advantage in 21st century because its work force as well. It's compulsory to get 5 year apprentice before join Morgan Motor. Numbers of staff member are very less compare to other automotive industry they are only 160. One of the interesting thing about most of staff are that their family member are also been part of the Morgan motors. They all are good at their work after five year apprentice. Staffs have to use hand tools for car manufacturing. One of the thing author point out in Morgan motor company that they still have tea break together which carried out since more than 30 years. Effect of this attitude can also be seen on progress and involvement of workforce in company.

Technology Development:

Morgan is still using those handmade tools which were used before to make its old model. Some of the tools were used in Egyptian time, Morgan engineer cut and adjust aluminium with hand cutter. Morgan car made up with ash wood, car engineer are still cut that and with old Handmade tools, some of the machine are new in production unit to make production fast but still most of the tools are same old and effective to give Morgan ancient look in Morden world. Worker paint Morgan car out of its 35000 of different colour.

Porter's generic model to evaluate resources and capabilities of Morgan motors.

Porter generic strategy:

"If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry. Even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns."(Porter, 1980)

Firm position itself depends upon its power to get maximum out of its strengths. Michael porter has argued that a firm's strengths ultimately fall in to one of two headings: cost advantage and differentiation (QuickMBA, 2007). Michael porter strategies called genetic strategies because they are not firm or industry dependent. The following table illustrates porter's model. (Figure 3, Appendix 2.3)

Cost Leadership strategy: In this strategy porter explain that the industry which are low cost producer and firm sell its product to earn a profit higher than that of rival or below average competitor price to gain maximum market share. Morgan doesn't fit in these categories of industry.

Industries which survive in this strategy are mainly had following internal strengths.

Access to capital required to make a significant investment in production assets; its represent a barrier to entry that many firms may not overcome.

High level of expertise in manufacturing process engineering.

Efficient distribution channels.

Differentiation strategy: the service or product which offers by company has unique attributes that are valued by customers and that customer are perceive to better than or different from the product of competition. Morgan somehow fit in this category of generic model of porter's. Morgan making handmade unique car which are not same as other car of Morgan. Morgan charge for that to its premium customer for this service. Unique attribute of product if suppliers of aluminium from Germany or Ash wood supplier increase their price Morgan can also pass that to its costumer who can't find any other substitute product easily.

Focus strategy: according to porter focus strategy concentrate on a narrow segment and within that segment attempt to achieve either a cost advantage or differentiation. Firm who using focus strategy can often enjoy a high degree of customer loyalty, which Morgan enjoying. Even though one year of waiting customer want to buy Morgan cars. There was once upon a time when Morgan got waiting list of almost 10 years customer. Morgan still concentrates on focus differentiation and not produces more cars and maintains its uniqueness in to the market.

As Morgan making around 750 handmade cars per year, it's in focus strategy of porter model which satisfied narrow marker segment that they know very well. (Figure 4, Appendix 2.4)

Morgan motor company has limited number of competitor because the entry barriers are very high, buyer power is less because of less number of alternative. Supplier power is high because low volume but Morgan can pass on its increase cost to its loyal customer because they don't have other substitutes. As per porter generic model substitute threat is very less or impossible because it's expensive to imitate. Rivalry cannot meet differentiation focused customer need as per Michael model.

VRIO (Value, Rarity, Imitability, organization) Model for Morgan Motor Company

The question of Value; "Do resources and capabilities enable a firm to exploit an external opportunity or neutralize an external threat?"(Jenkins et al, 2009) the answer for this question if "Yes" for Morgan motors so, the resources and capabilities are valuable of the Morgan motor and its strengths of the company. Morgan resources are valuable it increase revenue and reduce cost of the manufacturing cost and more efficient completion of the project. Morgan motors have valuable resources like its craft skill, tools which used in Egyptian time, skilled workforce. The ash wood which used in Morgan car is also give unique shape to each cars, because of this all Morgan cars are different from each other's(Charles Morgan)

The question of Rarity; "How many competing firms already possess particular valuable resources and capabilities?" author understand the value of firm's resources and capabilities is an important first but if any other industry copy or the value of that resources come down then this can affect the company's position. Company has something which is rare and not easily get by other competitor company like which Morgan motor has its skilled work force; most of all staff has to finished five year apprentice to be a part of the company. Most of all staff member who involve in complete hand work job like, car painter, frame designer who mould frame and wood crafter are mostly belongs to same origins. This is the rare part of Morgan motors. Combination of valuable resources and rarity stance Morgan motors in competitive advantage.

The question of Imitability; "Do firms without a resource or capabilities face a cost disadvantage in obtaining or developing it compared to firms it already possess it?" rare resources are only valuable until it's not imitate by other competitors. Imitability can be only possible mostly with intangible resources like worker skill, patent, particular material etc… Morgan has this advantage mainly work force, colour choice for the cars. Most of the car company provide colour variety of 10 to 20 maximum, but only Morgan is the only company which gives variety of almost 35,000 different colours water based and oil based. These are main competitive advantage for the Morgan. As per author view Morgan car are inimitable with its resource and capabilities bases.

The question of Organization; "Is a firm organized to exploit the full competitive potential of its resources and capabilities?" this question is the most challenging question for any organization to deal with as it highlights the need for management of the practice encourage a culture that allows suitable resources to be developed and to be availed. A firm's formal reporting structure is a description of who in the organization reports to whom; it is often personified in a firm's organization chart. Management control systems include a range of formal and informal mechanisms to ensure the managers are behaving in ways consistent with a firm's strategies. Morgan motor is private family firm but the organization is not hierarchical structure which makes difference, any staff member can directly present problem or suggestion to management. Components of firm's organization are often called complementary resources and capabilities, because they have limited ability to generate competitive advantage in isolation. However in combination with other resources and capabilities they can enable a firm to realize its full potential for competitive advantage. Morgan believes in that "Our great assets are our people" (O'Riordan, 2006)

Morgan car is fulfil all the criteria for the VRIO framework which shows it's sustain competitive advantage which is above normal economic performance of the firm.(Figure 5, Appendix 2.5)

Part 3:

As author agree with view expressed by both expert Paul Nieuwenhuis and Renato Orasato about modern automotive industry sustainability. Author agree with views for the company who believe in mass production but at the same time author not agree with their view for company like Morgan who target niche market , and use by selective group of people. (Knowledge video, 2009)

Renato also add that industry facing financial problem before crisis occurs in the real world. Automotive company has to think about other fuel option which they are doing in their research and development but they have to act fast on that and introduce hybrid cars like Toyota Prius. Author agrees with that the automotive industries have to launch different car model for different region of the world company has to launch new business related model because as one person driving car with capacity of four or more people can seat. Company and car holders have to think more about car sharing system to get most out of it. Same way this cannot be possible with Morgan car and author agree with that. Morgan car is use for status symbol of the owner so; author can't expect that they share cars and author disagree with both experts regarding Morgan can adopt this.

Morgan has adopting green car concept and they are also diverting to less CO2 emission car and light weight car, this is common between mass productive car company and Morgan Motor. This way author agrees and disagrees with two expert views in video interview.

If author will be consultant to Morgan the product marketing strategy will be like, Diversification and taking Morgan to other develop nation like United State of America, Australia, where people are found of Handmade and ancient look car. Morgan has created it status in United Kingdom, author want to do more advertising in to the particular market who found of this car in United Kingdom. Production of Morgan car is 750 as per 2006 figure. Author wants to increase not more than 850 to 900 a year. Author want to improve this strategy in coming 5 years, because for that company need special skilled workers. Distributer around the worlds, it's not possible to set up manufacturing unit in other country. Author wants to launch special collection of Mobile or other accessories for the Morgan car buyers.

FIRRM criteria:

New strategy will have to prove FIRRM criteria like it should be fit have proper Impact on organization performance within agreed time frames. Organization should have enough resources for implement strategy and Risk factor should cover under that strategy. New strategy should be manageable as well (Jenkins, 2009).

F in FIRRM, to carry Morgan motor to other country is fit when production will go up so company can export that cars to other market. Morgan cars allow for the sharing of resources or transferring of skills in such a way that competitive advantage is gained.

I in FIRRM, I represent Impact of Proposed strategy must be estimated using appropriate techniques.

R in FIRRM, R for resources Morgan motors has enough resources which are inimitable and rare which will support proposed strategy.

R in FIRRM, Risk factor is very less because Morgan will target niche customer Morgan has already wait list for deliver car and number of unit will not be more produce so, rarity will be maintain in new strategy.

M in FIRRM, proposed strategy will be manageable because through resources and capability of the firm and its profile it's manageable for Morgan motor to produce few more cars during proposed time frame and export to other country where already customer complacency is theirs. Morgan cars are giving best performance with BMW engine and unique structure. So the proposed strategy will give best and manageable result to organization.

Appendix 1:

Figure 1

Figure 2

Figure 3