Introduction to Jaguar
Jaguar Land Rover (JLR) is a UK based vehicle manufacturing company which is fully owned by Tata Motors of India. The company has a long history dating back to the World War Two era and has changed ownership numerous times. JLR began as a subsidiary of British Leyland in 1945 before it was acquired by Ford Motor Company in 1989. Following the 2008 financial crisis, Jaguar was purchased alongside Land Rover by Tata Motors. From that moment, the company began its turnaround to profitability. Currently, the company operates all of its facility in Britain with an exception to Chery Jaguar Land Rover Company in China.
Globalization and Integration
Globalization and integration mean that companies are bound to follow trends. One of the biggest trends that are occurring in the motoring industry is the sharp increase in the number of vehicle manufacturers making electric powered vehicles. In 2013, there were about 200,000 electric vehicles in the world. Comparatively, in 2016, the number stood at about 1.3 million vehicles. This represents a six-fold increase in the number of electric cars on the roads (Statista, 2017). Companies such as Toyota and Nissan were the first to push electric vehicles into the mainstream market. The success of Toyota Prius and Nissan Leaf has seen other companies join in the e-vehicle market. Jaguar has not been left behind since the company unveiled the I-Pace concept model in 2016 (I-PACE Concept, 2017). This vehicle is designed to rival similar models such as the Tesla Model X by offering premium designs and longer range (Knapman, 2016). Jaguar has to keep up with global trends because the company is competing in a highly competitive market with hundreds of vehicle brands.
Ballaban (2016) notes that before the UK joined the European Economic Community in 1975, most of the vehicles that were locally produced were of mediocre quality. The British manufacturers were not eager to adopt new technologies because of the governments protectionist policies which limited competition. Globalization has brought about an increase in the level of competition. In the UK where most of Jaguars vehicles are made, foreign-owned companies such as Honda and Nissan have set up big manufacturing facilities. These foreign companies have come in and developed a significant market niche for themselves in the UK and the European market. A report by Baiden (2017) shows that none of the top 10 selling cars in the UK are from UK brands.
However, there is a silver lining for Jaguar. Since the global markets are integrated and mostly open to all players, the foray of other companies into the UK has meant that Jaguar can gain access to other emerging markets. For instance, in the year 2003, Jaguar had sold around four hundred cars in China. Ten years later, the number had risen to over 51,000 vehicles (Oliver, 2012). Currently, Jaguar sells more cars to China than to any other market in the world including the United States (Shepherd, 2016). Even though Jaguars cars do not feature in the top ten best-selling cars in the UK, it is the countrys biggest vehicle manufacturer (Ruddick, 2016). Most of the vehicles manufactured and assembled in the UK by Jaguar are destined for the export market. A market made accessible through economic integration and globalization.
Further, Jaguar has been able to capitalize on open markets to set up production facilities in overseas locations. Jaguar has set up a production facility in China to manufacture engines. The company also had plans to develop a plant in Saudi Arabia to assemble vehicles (Foy and Mitchell, 2014). When foreign companies gained entry into the British motoring sector, there was perhaps a sense of fear that the local car industry would collapse. However, what happened was that the industry became transformed. Ford bought Jaguar, Land Rover, and Aston Martin. Rolls-Royce was purchased by BMW and Bentley by Volkswagen (Ballaban, 2016). These occurrences breathed a new lease of life into companies like Jaguar Motors courtesy of foreign entities.
In 2008, the company changed hands again because of the effects of globalization. The 2008 financial crisis had affected many American automakers, and Ford was fighting for survival. Ford transferred all of its ownership of Jaguar to Tata because unlike America, the Indian economy was less affected by the recession (Bajaj, 2012). Furthermore, Tatas diversified portfolio meant that it could absorb the various economic shocks. The same applies to Jaguar. Globalization allows the company to have diversified market segments which give the company cushion in case of challenges in a particular region. For instance, in 2015/2016 the Chinese economy experienced a slowdown in growth. Also, the Chinese government implemented an agency-wide crackdown on luxury spending. This translated to a loss of market for Jaguar Motors. However, strong growth in the US market ensured that Jaguar recouped some of the losses it made in the Chinese market (Ruddick, 2016).
Additionally, the interconnection of markets has led to the rise of overseas competition. In the Chinese market, Jaguar has to compete with luxury brands such as Audi, Mercedes, Porsche and BMW (Shepherd, 2016). This means that the company has to develop a wide variety of strategies for each of the target markets.
Also, competition from global vehicle manufacturers has resulted in a technological race with companies seeking to outdo each other. For Jaguar, this has meant coming up with technologies such as adaptive headlamps which turn along with a drivers cornering. Other inventions include see through trailers, Blind spot detectors, and quick-shift gears which offer seamless gear changes (Korosec, 2015). Such inventions are necessitated by the fact that international competitors are also aggressive.
In 2016 the UK voted to break away from the European Union. Since JLR operates from the UK, it is expected that the nations exit from the EU will have an effect on the motoring industry which includes Jaguar. After the Brexit announcement, the pound has lost around 16 percent of its value (Rodionova, 2017). Such a drop has a corresponding effect on the value of UK companies such as Jaguar. Additionally, Jaguar may lose its open access to the European market. This may end up affecting its sales since manufacturers within the European Union may get preferential treatment over Jaguar.
Additionally, when Tata acquired Jaguar, they did not seek to control the company from their headquarters in Mumbai. Instead, the new owners gave autonomy to the executives in England to handle operational decisions (Bajaj, 2012). Economies in the modern setting allow for such arrangements to take place. Ownership transcends physical boundaries. These ownership scenarios highlight some of the benefits of globalization and integration. The economic benefits of integration and globalization outweigh the political and economic costs (Selimi, 2012). Perhaps Jaguar-Land Rover Motors would have collapsed if the UK made use of isolationist economic policies.
According to a report by Deloitte (2016), the top three reasons for companies to outsource include cost cutting initiatives, specialization, and solving capacity issues. Richmond Design and Marketing (RDM) is one of the companies that Jaguar has contracted to develop rechargeable torches for use in their vehicles. RDM had outsourced the production of the components to China, but due to logistical and manufacturing costs, the company had to bring back its outsourcing activities (Brown, 2014).
In 2012, Jaguar entered a partnership with Chery Automotive Company in China to form Chery Jaguar Land Rover Company (Wachman, 2012). Jaguar was forced to move production from the UK to China for a number of reasons. At the moment, it was cheaper to produce vehicles in China than it was in the UK. The manufacturing industry in China is also less regulated as compared to the same industry in the UK. Further, labor and raw materials costs in China are lower than they are in the UK. According to Forbes (2015), a Range Rover Evoque that is made in China costs approximately 448,000 yuan. Comparatively, a similar car that is imported from the UK costs 528,000 yuan since such cars have to pay taxes and import duties. As such it made sense to invest in an offshore factory.
Moreover, China is a critical market to Jaguar. 2012 statistics show that one in every three cars manufactured by Jaguar was shipped to China (Wachman, 2012). Therefore, rather than shipping vehicles to a ready and growing market, it became economical for Jaguar to manufacture in China.
Additionally, Reynolds (2012) notes that Jaguar made use of outsourcing to save on the cost of procurement and material handling. Once Jaguar was purchased by Tata, their various engineering departments had stores in multiple locations. This led to a scenario where there were no defined store management processes, lack of visibility and coding system. By outsourcing their procurement function to their suppliers, Jaguar was able to reduce the number of components in their materials database by over 90 percent. Also, the company managed to lessen the number of suppliers it dealt with by almost half since they noted that by outsourcing to certain vendors, few companies could handle the bulk of their material needs (Reynolds, 2012).
On top of that, Jaguar realized that by outsourcing their warehousing function, they could save a lot of space. This space would then be utilized for its core functions which is the manufacture of vehicles (Reynolds, 2012). Jaguar also outsources its information technology department to IBM. Previously, the company had contracts with Tata Consultancy Services which was also considered outsourcing since Jaguar maintains a degree of autonomy from its parent company Tata. IBM offers Jaguar with management and modeling systems which are used in operations management, seamless communication, manufacturing, and in Jaguar's vehicles (IBM, 2015).
With regards to logistics, DHL is the company that is in charge of ensuring that all finished vehicles from Jaguars factories in the UK are moved to test tracks, showrooms, and events (Williams, 2015). The contract between DHL and Jaguar also covers the sequencing of parts for Jaguar across the various assembly lines (DHL, 2015). This demonstrates another form of outsourcing that allows Jaguar to avoid having a fleet of logistical equipment in the form of rail wagons and trucks which represent cost factors.
A 2013 report by The Economist (2013) shows that wages in Asian countries such as China are rising by 10-20 percent year on year. Thus, China is losing the title of being the cheapest location to manufacture products for companies. Jaguar's impetus for keeping manufacturing in China is the market size and the steady demand for luxury vehicles that has seen its market share rise to 19 percent in 2016 (Forbes, 2016).
Furthermore, the logistics costs can at times offset savings made from cutting down on labor expenditure. On top of that, manufacturing operations are increasingly becoming automated. As such, it makes less of difference if companies produce in their home countries or abroad. Automation has reduced the amount of savings companies make through offshoring and outsourcing activities (The Economist, 2013).
Lean and Agile Logistics
Lean logistics is mainly concerned with minimizing costs through the development of standardized processes which will eliminate repetition of duties and waste while at the same time enhancing quality levels. On the other hand, agile logistics aims at improving the speed at which a company responds to the dynamic needs of their clients. Such a system requires products to be very...
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