Impact of Globalisation on Jaguar Land Rover UK - Case Study Example

IMPACT OF GLOBALISATION ON JAGUAR LAND ROVER (JLR) UK Name Course Tutor Date Executive Summary The first section which is the introduction section provides an overview of the report giving a foundational background and why JLR has been chosen as a model for internationalization of business. The next section evaluates the success of Jaguar Land Rover since 2008. The next section describes the impacts of the growing economies of china on the situation of JLR and its success in general. The following section then looks at the future issues likely to result from engaging in overseas production as well as the issues surrounding the overreliance on external foreign markets for sales. The last section then summarizes the whole report by highlighting the key issues discussed. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Background of JLR UK 4 How Jaguar Became Successful Since 2008 5 Impacts of Growing Markets and Economies to JLR 6 Future Issues in Engaging with Overseas Production and Issues Surrounding the Overreliance on Foreign Markets for Sales 7 Conclusion 9 Bibliography 10 Introduction The rise in technology has made the world become a global village. As such, businesses must expand their markets into new geographical areas in order to remain competitive globally. Jaguar Land Rover is one of the largest UK automotive manufacturing companies (Jaguar Land Rover, 2013). The company has its headquarters in Coventry, UK. The company is known for its two iconic car brands: Jaguar and Land Rover (Jaguar Land Rover, 2014). This paper explores the contemporary issues of internationalization of business in its global context explaining how it has exploited the issues to its advantage. The paper also evaluates the impact of rising markets in India and China on JLR. Background of JLR UK The history of Jaguar Land Rover Company can be traced back to 1922 when it produced motorcycle sidecars. Initially before being changed to Jaguar the company was known as Swallow Sidecar Company (Jaguar Land Rover, 2013). It had since won most awards. Jaguar split with Leyland in 1980s and became independent. Land Rover joined Jaguar in 2000 under Ford after acquisition and partnership. Jaguar and Land Rover were bought in 2008 by Tata Motors; India’s largest automobile producer. The two joined officially into one company JLR in 2013. Sales and Profits of the company have risen ever since (Jaguar Land Rover, 2014). JLR is transforming business in different ways in order to make known the brands and be profitable. The company has a workforce of 32,000 individuals globally while at the same time supporting over 210,000 jobs in the UK through various channels such as distribution and dealer networks, supply chain and the general economy at large (Rice, 2014). The company has invested heavily on state-of-the-art facilities of production as well as research and development facilities (Jaguar Land Rover, 2014). How Jaguar Became Successful Since 2008 The success story of the almost stumbling British company came through acquisition by China conglomerate and India based automotive manufacturer Tata. Tata paid Ford $1.3 billion because at that time the luxury car manufacturer, JLR, had little value to Ford (Jaguar Land Rover, 2014). Acquisition is one of the drivers of internationalization (Gong, 2013). Acquisition refers to a corporate strategy or action where a company buys most if not all of the company’s ownership thus assuming the ownership and control of the latter company (Gong, 2013; Ebner, 2011). The acquisition provided the two automotive manufacturing giants to build into one and conquer the market (Jim, 2014). Tata has continuously supported JLR in many ways. For example, during the recession, to make JLR solvent, Tata secured a loan of £340million in 2010 (Jim, 2014; Carty, 2014). Additionally, Tata also launched a five year investment plan of £5 billion in 2011, to enable JLR focus on new equipment and development in the three major UK plants (Jim, 2014). Tata Steel Company also ensured that the essential supplies of light weight steel were in place (Carty, 2014). In November, 2011, JLR made an announcement of over 1000 new jobs as a result of rising demands in China, India, Russia and Brazil (Team, 2014). Apart from the success in creating new jobs the sales of the company has also increased relative to that of Tata. The sales of JLR as per 2012 rose by almost 40% through the sales of about 35000 of its new Range Rover Evoque units (Jim, 2014; Topham, 2014). The largest market was realized as China since it overtakes the UK domestic market (Jim, 2014). Apart from the acquisition by Tata JLR ha also formed a joint venture with Chery Automobile in 2012, this paved way for production of Jaguar and Land Rover cars in China (Team, 2014). With the joint venture JLR has been able to invest very much in R&D to come up with vehicles tailored for the Chinese business class (Jim, 2014). The company also set up a fully owned National sales company in China to take foot of the Chinese market by growing and managing its dealer networks. The joint venture with Chery provided JLR the opportunity to build the first ever manufacturing plant outside UK, in Shanghai (Jim, 2014). The partnership has seen JLR import vehicles into China with only 25% income tax on the sales (Topham, 2014). Furthermore, the location of the plant not only localizes the production but also positions JLR above its competitors, who also have a good global representation (Jim, 2014). The company has a network of dealers as well as Land Rover Experience centers that handles all issues concerning Land Rover models (Jaguar Land Rover, 2014). There are also several assembly plants in Kenya, Pakistan, Turkey, and Malaysia to further increase the coverage of the company internationally and cater for the needs of the large consumer base all over the world (Jaguar Land Rover, 2014). Additionally, JLR has development centers in Minnesota, Germany and Dubai. These centers are located in high end competitive markets. Impacts of Growing Markets and Economies to JLR The growing market and economy in China has presented JLR with an opportunity to grow its business in different ways (Biswas, 2013). As mentioned earlier, there are partnerships in the form of joint ventures that were made between the Chinese Government and JLR. The partnership would see JLR build the first global and outside UK based plant in Shanghai, China (Jim, 2014; Team, 2014). The rate at which the Chinese consumers demand British luxury brands, specifically Jaguar and Land Rover, is rising. China has been the largest market for JLR compared to the UK (Team, 2014). In 2012, the sales in China grew by almost 71% . The rise compared to 2013, suggests that China’s rising economy boosts the market of JLR (Jim, 2014; Biswas, 2013). The market is mainly driven by the affluent middle-class Chinese population (Team, 2014). The Shanghai plant is estimated to produce about 130,000 units of vehicles annually to cater for the rising demand. With its root in china JLR has been able to create standardized design through their research and development wing. India has also formed one of the most important markets for JLR considering the rise in demand as well as the previous status of Tata in the region (Team, 2014). Future Issues in Engaging with Overseas Production and Issues Surrounding the Overreliance on Foreign Markets for Sales There are myriad of issues in the form of risks that come into play when companies engage in overseas production. The risks come along as a result of language, culture, customs, and trade regulations (Miozzo & Miles, 2002). Additionally, any company that does this is bound to face some hitches in transport, technology transfer as well as capacity and lack of proper management systems (Ryan, 2011). The companies engaging in overseas production would have to outsource raw materials and labor. Jiang & Tian (2009), note that the cost of outsourcing labor from various countries is very high, especially in cases of importing labor. This comes due to diversity in culture, regulations and different time zones (Ryan, 2011). Additionally, the whole process of managing an international manufacturing process may be difficult. However, with proper and well laid strategies the companies can still manage it out, but of course at a cost (Jiang & Tian, 2009). Different countries have different types of regulations (Wijen, 2013). This includes the amount of taxes to be paid when trading with such countries, the consumer protection rights, and health and occupational requirements (Wijen, 2013). Some of these are likely to impact the manufacturing company negatively in case it cannot comply. These issues might make the company incapable of flexibility in the market (Jiang & Tian, 2009). Integrating the language and cultural differences in the other countries might also be a hard task. There are also countries that are ethically aware and have a set of laws which might be stringent, especially when sourcing for labor. There is Intellectual Property Rights risk when the company is engaging in production overseas since some of the property rights have to be transferred (European International Business Academy, Larimo, Vissak, & European International Business Association, 2009). This includes in depth knowledge and intelligence regarding design, materials, and vital elements and engineering (Jiang & Tian, 2009). The company engaging in such production will have to give up the property right and consider spilling its secrets to the partners in the new country (Miozzo & Miles, 2002). This can negatively impact the business since the competitors can sabotage the information and gain a competitive advantage over them. In trading with different countries it means crossing boundaries (Jiang & Tian, 2009). Conclusion JLR is a large multinational automotive company that was acquired in 2008. Some of the drivers of internationalization include joint ventures and the acquisition itself. The emerging economies and therefore markets such as India and China have expanded the market presence of JLR. JLR’s greatest market as per statistics is China that also houses one of the overseas manufacturing plants in Shanghai. There are issues that are likely to face the company should it over rely on foreign markets and overseas production as discussed above. Bibliography Biswas, R. (2013). Future Asia: The new gold rush in the East. New York: Palgrave. Carty, S. S. (2014). Tata Motors to buy Jaguar, Land Rover for $2.3B - ABC News. Retrieved from http://abcnews.go.com/Business/story?id=4528213 Ebner, H. (2011). Reasons for the Internationalisation Process of Companies. Munich: GRIN Verlag GmbH. European International Business Academy., Larimo, J., Vissak, T., & European International Business Association. (2009). Research on knowledge, innovation and internationalization. Bingley: Emerald. Jaguar Land Rover. (2013, December 10). Growth and future capital investment strategy update | Jaguar Land Rover Corporate Website. Retrieved from http://www.jaguarlandrover.com/gl/en/investor-relations/news/2013/12/10/growth-and-future-capital-investment-strategy-update/ Jaguar Land Rover. (2014). About Us | Jaguar Land Rover Corporate Website. Retrieved from http://www.jaguarlandrover.com/gl/en/about-us/ Jiang, C., & Tian, Y. (2009, August). Problems and Challenges of Global Sourcing: A Study of Chinese Manufacturing Enterprises. Retrieved from http://hj.diva-portal.org/smash/get/diva2:318924/FULLTEXT01.pdf Jim, R. (2014, June 13). Jaguar Land Rover’s Strategy for Growth in China | Business | tutor2u. Retrieved from http://beta.tutor2u.net/business/blog/jaguar-land-rovers-strategy-for-growth-in-china Miozzo, M., & Miles, I. (2002). Internationalization, technology, and services. Cheltenham, UK: Edward Elgar. Rice, A. (2014, August 21). Jaguar Land Rover and HSBC using CSR to ensure brand success in China | Guardian Sustainable Business | The Guardian. Retrieved from http://www.theguardian.com/sustainable-business/2014/aug/21/china-csr-corporate-social-responsibility-jaguar-land-rover-hsbc Ryan, J. (2011). China's higher education reform and internationalisation. Abingdon, Oxon: Routledge. Team, T. (2014, May 30). Jaguar Land Rover Drives Top Line Growth As India Sales Decline For Tata Motors - Forbes. Retrieved from http://www.forbes.com/sites/greatspeculations/2014/05/30/jaguar-land-rover-drives-top-line-growth-as-india-sales-decline-for-tata-motors/ Topham, G. (2014, February 10). Jaguar Land Rover profits continue to boom | Business | The Guardian. Retrieved from http://www.theguardian.com/business/2014/feb/10/jaguar-land-rover-profits-carmaker-sales Wijen, F. (2013). A handbook of globalisation and environmental policy: National government interventions in a global arena. Cheltenham, U.K: Edward Elgar Pub. Gong, Y. (2013). Globalization of Operations. Retrieved from http://www.springer.com/cda/content/document/cda_downloaddocument/9783642367076-c2.pdf?SGWID=0-0-45-1397207-p174960878 Read More