Strageic Analysis: Morgan Motor Company - Essay Example

MORGAN MOTOR COMPANY-STRAGEIC ANALYSIS Morgan motor company was founded by Henry Fredrick Stanley Morgan (or HFS for short) in 1909, who guided the company for almost fifty years. It was his experiences with7hp two cylinder model car called the “the little star”, that led to the birth of the first Morgan Runabout. (themanufacturer.com). Normally, thirty years is usually considered as an Era, characterized with sea changes for human’s and the environment. The 98 years of history of Morgan motor company proves this point true. The history of Morgan motor company marks the completion of three successful eras and the onset of the fourth era. The first era is called as the ‘Entrepreneur era’ that starts from 1909 to 1939.In 1909 HFS built his first prototype with the help of Malvern boys college engineering workshop and W. Stephenson Peach, grandson of the inventor of the “Rocket”. (morgan-motor.co.uk) . Sir John Black helped in attaining patent for sliding pillar suspension. The designs made by HFS were lightweight and simple for reliability. In 1910 the Morgan Runabout was showcased at the Olympia motor show London. The three wheeler runabout was a car made with the aim of making low priced vehicle available to the masses. The Three wheelers benefited from the lowering of the road taxes by £3 (bcu.ac.uk). The Morgan motor company gained reputation by 1928 as the most preferred sports car. Many more sports versions were launched because of their strong grounding and also greater speed. By 1936 the factory started producing 30,000 cars but by this time the concept of three wheeler cars became irrelevant. As a solution to tackle this problem, HFS designed a car with four wheel and four cylinder models. The period between 1945- 1975 marks the second thirty years of Morgan history. This period was the “Gung Ho” sports car Era. As time passed on many more new cars were produced like the new version of four-seaters with a modern look and Morgan motors became the first car company to get celebrity endorsements. (morgan-motor.co.uk). This era saw the emergence of his son Peter Morgan Stanley as a creative and innovative leader. The next era started from 1975 to 2005 which was characterized by the world wide safety and emission standards for the motor industry. In this stage, the company realized their social responsibility and worked towards contributing and protecting the environment. The company improved the working conditions for the employee and also gave more attention to quality of the products. The Morgan aero eight was launched in this era. Morgan aero eight is the first aluminium intensive vehicle. (morgan-motor.co.uk). By 2006, the company had successfully survived three 30 Year Periods and now Morgan enters a New Era. Morgan’s alliance with key suppliers is critical to allow the company to have access to the latest technology. The current environment of the car industry in the 21st Century certainly brings some new challenges for Morgan. Morgan’s current development work is designed to meet some of those challenges, and incidentally, the philosophy behind it also fits neatly with the achievements of Morgan’s past. Owning a Morgan was an issue of prestige, style and displayed the passion of car lovers. Morgan or widely known as ‘Moggies’ was a vehicle known for its durability and reliability and thus buying a Morgan was similar to entering a long term contract. Morgan is not considered as practical or comfortable but it is still preferred by people because of its ruggedness, good driving experience and speed. (pwc.com 2009) The PEST analysis PEST analysis is merely a framework that categorizes the environmental influences that tend to affect the functioning of the industry into political, economic, social and technological factors. Morgan Motors like any other car company has always been impacted by the government policies. Such as in the earlier periods, reduction of the taxes only led to the lowering of the prices and the success of the three wheeler cars by Morgan. The economic factors such as the demand and the supply and the government policies also influenced the company. The companies’ production increased subsequently due to the increase in the demand of Morgan cars and also because of the cutting down of the number in waiting list. (tripod.com).The government had banned racing by the three wheeler cars against the four wheeler cars which led to the birth of four-four cars from the company. The country faced some steel shortage in the earlier times due to which wooden frames are used in the cars. Thus, the waiting list allowed cars to be given at second hand rates. On the other hand, the government policy of introducing the safety and emission standards led to increase in quality and increase in production efficiency. The regulation bought in the need to produce vehicles which are beneficial for the society and thus Morgans became more responsible corporate citizens.(morgan-motor.co.uk 2009). The company produced a sufficient amount of cars to over 30 countries thus it has to take care of the requirements of each country and also ensure that they adhere to all the norms and policies regarding quality, product, etc in each country (pwc.com). It is essential that the company also take care of the exchange rate fluctuations in case of exports. The economic conditions, be it recession or economic boom impacts the car companies. Likewise, when the fuel price goes up due to economic scenario or other economic fluctuations, the company has to increase prices, thus validating how economic factors could impact car companies including Morgan. The company was based in Melverlin link where people are very passionate about their cars and thus owning the Morgan was like everyone’s cup of tea. Thus, the social factors such as passion, aristocracy, status, etc played a very important role in the purchase of the cars produced by the company. The employees had loyalty towards their company and would stay in the company for more than 15 years (the manufactures.com). The owners of the company were very passionate about the cars they produced and this same thing was passed onto their employees. The customer demands are varying day by day and thus the company was providing an option of customization. The company believed in old traditional ways of doing work and considered car making to be product led and not process led. The internet has also led to change in the communication and perception of people (tripod.com). The introduction of new technology led to a shift from their traditional framework and incorporated technology as an important part of their car manufacturing. The company made alliance with Ingratech to get technological solutions to various issues, and to keep them updated about the new trends and also to help in incorporating them (morgandc.com). The company had adopted technology such as CAD that helps them in designing and creating adequate car designs. As part of introducing new technology and as a social perspective the company has introduced an eco car that runs on hydrogen fuel. Even though so much of technological advancement has taken place in the firm, the company still adopts the traditional production systems. SWOT analysis. This is used to analyze the strengths, weaknesses, opportunities and threats of the firm. Strengths The company allows customization of the vehicles. All the vehicles are hand built which ensure complete assurance of quality and durability. The company’s vehicles cost less when compared to competitors even though they provide the best features. Morgan Motors have knowledge transfer program that is a tie up with the colleges which allows use of modern technology and allows apprenticeship programmes Morgan Motors receives orders online or through agents. Produces over 700 cars a year and exports 65-70% of the cars (morgan-motor.co.uk 2009) Lean programme with the Birmingham University that allowed development of skilled workforce. Wood work and wood frames are the major appeal. The factory tour was an innovative idea that has led to increase in trust and awareness among customers. Weaknesses The changing customer demands The changing technology and creation of new models each day. The supply chain management in Morgan Motors is weak as the products are made on order thus long term contracts for materials cannot be signed. The storage of excessive materials becomes difficult. The lead time may cause a problem at later stages. The requirement of skilled worker is essential. The cost to train these workers may also be high for Morgan Motors. Opportunities New innovative ideas can be developed like the eco car. This is an opportunity that the company has tapped. Morgan Motors can increase production by introducing new production facilities and making a shift from the traditional methods or it can also be incorporated with the traditional methods. The launch of new sport cars will increase the firms’ revenue. Increase market share by introducing not only new products but also variety of products. Threats Increased or continued competition that leads to price fluctuation, fluctuation in exchange rates, etc The suppliers inadequacy to deliver Incremental change while thinking which blocks innovativeness Declination of sales due to geopolitical and economic factors all over the world, particularly in Britain. Threat of Japanese companies coming out to be major player in the car sector throughout the world including in England Changing requirements of internet informed, empowered consumer and growing trend of customization. The power of other companies to penetrate into growing potential markets such as India and China. Threat of falling short of supply to meet demands due to economic fluctuations. Porters five force model 1. Threat of new entrants The company faces no issues from the entry of new players in the field because of the brand name of the company and the advantages it has as being the pioneer and first mover in many aspects especially the sports car market. (hoovers.com). The entry of player is not easy because of the regulation imposed and also because of the capital required by the industry. Although barriers to new entry are substantial there are established companies that have entered the market particularly Japanese auto majors, with Toyota leading the race. 2. Threat of substitute products This can be problem for the company because of the long waiting list. A customer wants his/her demands regarding customization to be fulfilled immediately. However, if it is not done, the customer may look for other car models that would fit their requirement and can be delivered immediately. Threat of substitutes also refers to substituting the car with another mode of transportation, which can be possible due to the changing attitudes of the people and also in population density areas where the cost for local transport would be less. (scribd.com). However, this would not impact Morgan motors maximally because the Morgan with its kind of features, quality and performance focuses on a wider segment, so Morgan cannot be replaced by using another vehicle. Morgan is style vehicle which is preferred due to its look. It is considered as a status symbol thus substituting it with another vehicle will not give same results as owning a Morgan. 3. Power of buyer The buyer here refers to the customers and their power to buy and negotiate with the supplier of the product. If the buyer is the customer then the power of the buyer is not too much as they can only place their orders and give specifications but cannot argue with the delivery date. (scribd.com). The buyer’s of Morgan motors get second hand rates as the production and delivery time is high and thus the part of negotiating the price does not come into play here. 4. Power of suppliers Suppliers are the people who supply the raw materials to the company. Their power is very high as the company requires material only in small quantities and suppliers usually contract material for a year. The company cannot take materials for a year since it makes the product on order and thus requires only specific amount. The power of the supplier is high as they can negotiate their prices at will. 5. Degree of rivalry The company faces competition from various companies like BMW, Ford, Volkswagen, Porsche and a slew of Japanese care companies.(Interbrand.com) These companies following many of the innovative ideas of Morgan motors, are giving a tough competition to the company. The competitive companies especially Japanese auto majors with their lean and JIT (Just in Time) processes adopt new technologies for production and have no waiting list. Although, these competitors nudge Morgan Motors, it is not too threatened as they have a competitive advantage of being light weighted and low cost, low emission vehicle. Ashridge Model. The purpose of the company is to provide the best vehicles at affordable prices, and to fulfil that purpose, Morgan Motors aims at customizing vehicles according to customer needs at affordable prices. The company and employee values are all about dedication to their work and being passionate about what they are doing. The company circles always say that Morgan motors are product led company and not process led. They encourage a family environment at all levels. The company focuses on having low set up and producing the best. They ensure high quality products. The employees are loyal and committed to the company. Thus, Morgan Motors produces the lightest weighted products, with low cost and low emission rate. The company aims at producing reliable, durable and high quality products by ensuring recruitment of skilled workforce. The Knowledge Transfer Partnerships (KTP) programmes and professional training programs initiated by Morgan Motors in association with other stakeholders, further add on value to the company. (morgan-motor.co.uk 2009) As part of Ashridge Model, the company aims at incorporating the traditional methods with adequate technology that gives them an advantage over other companies. The Morgan motors has always been a company with the first mover advantage. They have introduced many innovative aspects that have been used by others later on. The Morgan motor company has been in the market for more than 100 years and has overcome many stages and challenges to be where they are today (allonwhite.co.uk 2009). Morgan motor company is the only independent company existent from such a long time and this itself shows the company’s success. Morgan motor company started as a family company, small and flexible and still holds the same value. The system followed by the Morgan motor company is feasible in todays times because customer is more informed and has varying demands. The traditional way of building the product gives the customer an invaluable experience. MMC targets a niche segment of customers on the basis of their passion cars. Morgan motor provides a perfect blend of traditional methods with the new and latest technology that appeal to the people. The company believes in catering to the passion of their customers and this belief has become an integral part of the company’s culture. Focus areas and conclusion From the above analysis, it is clear that Morgan Motor’s external environment as well as the internal environment is on the favourable side and acting on the lines of suitability, paving the way for the investor groups to invest in Morgan Motor. That is, after analyzing Morgan Motors through various models, the results shows that Morgan has a stronger niche market, with the process of providing customized cars to the customers. Morgan by operating in the niche sector brings in niche customers in addition to the common customers. With the investors’ group focusing on the suitable options in the niche market, Morgan is aptly suitable. In the external environment, although competitors are showing good visibility, Morgan’s long-standing brand name and quality aspects help it to withstand the competitors, and also to leap over them. This makes it a feasible option for the investors’ group to go ahead with the investments. Although, economic factors in the external environment is impacting many car companies, Morgan motors is able to survive as well as succeed because of its focus on a niche segment. With government also supporting auto companies who are coming up with environment friendly vehicles, Morgan Motors are also in the list and thus has good backup. Thus, when feasibility of Morgan Motors is analyzed it is clear that its favourable factors in the external environment make it a feasible option for investment. Finally, when the focus area of acceptability is analyzed, it is clear that Morgan Motors is also functioning aptly in the internal environment along with suitability in having customer base and feasibilities in the external environment. That is, as discussed above, all the stakeholders from employees to the management are coordinating optimally, accepting the organisational goals. With the management and the employees who have major passion for cars are mainly recruited or selected, the productivity of Morgan Motors is also on the higher side, thus making it acceptable for the investors group to go ahead with the investment. 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