Manufacturing Excellence at Bentley

Introduction

The erstwhile Bentley Motors Limited, was established in 1919 at Cricklewood, North London by W.O. Bentley and had gained the reputation of being the foremost manufacturers of luxurious personal vehicles in the global markets. The company has current headquarters at Crewe, England. Volkswagen Group had acquired Bentley Motors in the year 1998. Currently, the most prominent models manufactured by the Volkswagen Group (VG). Most of the Bentley branded cars are manufactured by VG at the factory at Crewe and the rest are assembled at the factory of VG situated at Dresden, Germany. Furthermore, the Continental series of Bentley branded vehicles are manufactured at the VG factory at Zwickau and the Bentayga series of cars are assembled at the Bratislava assembly plant of VG.

LO1 Analysis of impact and influence of the macro environment on Bentley Volkswagen business strategy

P1 Analysis of the impact and influence of the macro environment Bentley Volkswagen

PESTEL analysis

Political

Hönig (2019) has observed that the most significant current issue concerning the political factors of the operational macro environment for the Bentley Volkswagen (BVW) is the persistent political tension and strife in between the EU and the USA involve the element of trade tariff extents. According to Whittall et al (2015), Donald Trump, the president of USA had indicated the possible imposition of an extra slab of 20% trade tariff on the vehicles imported from the EU in 2018 and this measure, if implemented, could contribute to the raising of tariff levels from the existing tariff duty of 2.5%. Young (2016) has also stated that imposition of such tariffs could impact Volkswagen manufactured products especially since the VW dominates the EU sector of automobile exports. This observation has been lent credence by the fact that out of the $42billion worth automobiles imported by the USA from the EU during the 2017-18 financial year, $20 billion had been exported by German automobile manufacturers such as the VW. According to Noton (2016), another political issue is the policy of the USA government to put an end to the sales of petrol and diesel fuelled cars by the year of 2040. This has come in the wake of the banning of 1.2 million VW cars at the UK as the diesel scandal of the company had emerged into the public domain during 2017. This had adversely affected the sales of VW automobiles at both the UK and in the global arena. Ewing (2017) has opined that the zero carbon emission framework formulated by the UK government under the designation of “Road to Zero” initiative. According to Loureiro and Kaufmann (2016), such trends indicate the greater emphasis on the complete removal of petrol and diesel run vehicles within the domestic markets of UK and USA and this has already negatively contributed substantially to the sales volume of BVW in terms of a decline of 20% of the sales of petrol and diesel fuelled vehicles of the company under consideration since 2017. Bailey and De Propris (2017) have outlined that Brexit could be considered to be the third political factors which could considered to be have an extensive impact on the sales prospects of BVW cars since, as a direct implication of Brexit, the scaling back of consumer expenditure for luxury vehicles has been observed.

Economic

According to Begley, Collis and Donnelly (2015), VW is currently the largest automobile manufacturer within the EU with current market share being that of 25%. In terms of the volume sales, the EU is the leading market for the VW with 4.7 million vehicles sold which tops those of the Asia Pacific region with 4.5 million vehicle sales and North America with 1 million sales (bentleymotors.com, 2019). Saridakis and Baltas (2016) have opined that $180, 195 is the initial price of product offerings by BVW. Various models of cars and SUVs which are considered to be of higher end, including the Bentayga, generally field a comparatively greater initial offering price such as $229,100 for the Bentayga model. Holweg and Oliver (2015) have outlined that Mulsanne model currently costs the highest in the price range of $ 303, 700. In this context, as per the opinion of Pardi (2015), the Bentayga is the most exorbitantly expensive SUV which is currently manufactured by the BVW. The top 4 other expensive luxury models manufactured and offered by the BVW are as the following (annualreport2016.volkswagenag.com, 2016):

1:Bentley Continental GT3 Concept-$ 720,000

2:Bentley EXP 9 F Concept- $ 1 Million

3:Bentley Brooklands- $540,000

4:Bentley Continental Supersports-$550,000

To this effect, the most significant economic issue concerning the sales prospects of BVW has been the potential economic fallouts of Brexit. The reason has been the declining consumer expenditure trend and the associated decline in the demand of the exclusive brand of cars manufactured under the brand identity of BVW. Furthermore, the inflation in prices of SUVs due to Brexit has reached to 5% of the previous gross price marks and this has also affected the sales and demand prospects of the company under consideration.

Social

According to Moon and Sprott (2016), the socio-cultural macro-environmental factors influencing the business prospects of BVW are the elements of social mobility, income prospects and cultural perspective transformation. Another significant factor is the propensity to implement leisure or opulence infusion practices within the general living conditions, mostly at the UK domestic markets. The maintenance of the product appeal is of key significance for the BVW products since the Bentley vehicles are mostly offered to affluent and wealthy customers.

Technological

Loureiro and Kaufmann (2016) have stated that the development of autonomous vehicles could be the most prolific macro-environmental business influents for the BVW. Such technological aspects involve artificial intelligence, inbuilt radar emitters, terrain sensors and bulk data analytic processes which are instilled into the mainframe of the vehicles for improved and automated navigation. Such autonomous drive technology highlights the most severe technological threat for the BVW cars since this could undermine the concept of vehicle ownership. Bloomfield (2017) has highlighted the KPMG survey which estimated that approximate 60% decline in the car ownership would take place at UK alone by 2025. However, since the autonomous technological innovations are oriented towards transformation of urban mobility into service based mobility concepts through mechanisms under which most of the commuters could summon automated transport services, this does not have any extensive negative impact for the BVW products since the Bentley cars are associated with excellence and uniqueness in terms of their prestigious appeal and the element of exclusivity. Furthermore, the Bentley cars also pertain to the most aristocratic and exotic sensibilities of the wealthy customers and the cars combine luxury, quality, heritage and utility into a single frame.

Legal

Ewing (2017) has outlined that Volkswagen had to remit criminal penalties worth $4.3billion due to the diesel emission scandal which came to the public domain during 2015. This penalty included restitution fines for the environmental legal violations which the company had performed. The legal proceedings had adversely influenced the reputation of BVW which led to the decline in sales in the following years and the cumulative monetary value of criminal damage charges amounted to $25 billion. This amount also involved the civil litigation based financial compensation for exceeding the permissible limits of carbon emission.

Environmental

The previously mentioned legal factor involving the diesel emission based scandal also had brought forth the influence of the environmental factors in terms of emission related legal stipulation. The global emphasis on emission reduction and for that purpose, on the gradual phasing out of fossil fuel driven vehicles, doe influence the sales prospects of Bentley. Furthermore, the environmental sustainability effects on the general psychology of the car owners throughout the global scenario, have influenced VW to incorporate the zero emissions policy in the new manufacturing models. Such models have been also put to utilisation under the digital application based service of car sharing known as the WE service during 2019.

M1 Determination of strategic management decisions

The previous macro-environment analysis has also outlined that in spite of the pending tariffs by the USA and the greater decline in the sales of personalised luxurious cars at the EU markets, Bentley Volkswagen have been able to capitalise on the positive exchange rates through reduction of costs. The operating profits have gone up in the measure of €2 million (from €110 to €112) in the current financial year (volkswagenag.com, 2017). The hike in the start up costs of the Bentayga has, however, contributed to the reduction of operating returns on sales from 5.7% (previous financial year) to 5.5% (current financial year) (volkswagenag.com, 2018).

D1 Critiquing and interpretation of information derived from through macro-environmental analysis

The previous macro-environmental analysis of the Bentley Volkswagen has brought forth the realisation that the strategic management related decisions of the BVW have to concentrate greater focus on the expansion of the product portfolio through a fourfold method. The marketing campaign of BVW is thus oriented towards projecting the perception of prestige which is associated with the ownership of any Bentley at the premium prices. According to Wilson (2005), this socio-psychological impact is designed to foster a specific response from the wealthy customers of SUVs which borders on the sense of experiential and sensory fulfilment. The reason has been that the customers of the BVW branded cars are mostly billionaires and the super wealthy with an acute inclination towards transformation of their social prestige into an active practice of living. Thus, the social perceptions of prestigious and superior status of living are core constituents of the social factors which influence Bentley business prospects (Rawlinson and Wells, 2016).

LO2 Assess an organisation's internal environment and capabilities

P2 Internal environment and capabilities of Bentley Volkswagen

The internal environment and capabilities of the BVW are primarily indicative of the cumulative effects of various strengths and weaknesses of the company under consideration. Such effects, in turn finalise the organisational response to the external influences of the business environment in the form of existing opportunities and threats. In case of the BVW, it has always been necessary to evaluate the symbiosis between the internal capabilities and the external business environmental changes which determine the market objective obtainment for Bentley Volkswagen.

M2 Critical evaluation the internal environment of Bentley Volkswagen to assess strengths and weaknesses of the company

SWOT analysis of BVW

Strength

1. Luxurious, aristocratic, exotic and premium priced cars with high symbolic significance.

2. Qualitative, glamorous and utilitarian appeal of the products.

3. Effective brand equity and reputed market position of the company on the global scenario (Bown and Crowley, 2016).

4. The expensive price range and limited availability of cars do add to the uniqueness of brand value in terms of fostering elevation of the status symbol for customers.

5. The manufacturing and technical support automobile giant Volkswagen.

6. The possession of exclusive and crème de la crème clientele such as the global celebrities which is another addition to the brand uniqueness and prestigious perceptive value attached with the products of the company.

Weakness

1. Relatively limited penetration of the markets in emerging global economies such as the Chinese, Indian and South-Eastern Asian and Asia Pacific regional markets.

2. No policy of bulk production of the luxurious cars and SUVs so the demand is also limited.

Opportunities

Greater emphasis on the generation of effective fusion in between heritage based handcrafting manufacturing processes with the cutting edge design formulation through latest design assistance software so as to improve the symbiotic ergonomic conditions between the owners and the vehicles while maintaining the maximised appeal of luxury.

Greater concentration of effort on manufacturing of cars which could be environmentally friendly in through hybrid and electric power sources and transmissions.

Application of strategies to target specific rich and affluent classes from the new and emerging economies.

Greater sponsorship of premium promotion events so as to expand visibility of the brand.

Threats

Larger displacement structure of engines which are incompatible for environmentally friendly power sources.

Government restrictions on emission rates.

Greater proliferation of competitive premium branded cars.

Bargaining power of customers

Intensity: Moderate

Reason: Limited availability and supply of the luxury vehicles and SUVs

Point of significance: The customers are mostly individuals and are never grouped or categorised. Each of the individual customers also possesses extensive amount of information regarding the costs, unique qualities and price variations of the offered luxurious cars by BVW.

Market rivalry

Intensity: Extremely High

Competitors:

1: Mercedes Benz

2: BMW

3: Rolls Royce Motors.

4: Aston Martin

Reason: The majority of competitors are global MNCs with extensive investment assets. These competitors are mostly oriented towards avoiding of any price war. For this purpose, cost leadership policies of BVW could assist the firm in earning of profits when other competitors could compete away their share of investments and profit margins in the hyper competitive market situations.

M3 Competitive edge and market position improvement strategy

According to GIACOSA (2016), the automobile industry within the UK is characterised by the offering of exclusive branded products such as Bentley Volkswagen, Land Rover, Rolls Royce, Aston Martin, Jaguar and others. The consistent feature of such UK vehicles has been the export orientation of such vehicles. The current macroeconomic environment of UK, pertaining to the automobile business, is characterised by the production of approximate 1.5 million personal automobiles and 216000 commercial vehicles annually. 75% of such vehicles are exported and Bentley Volkswagen has to occupy a niche position amongst the automobile export market since the exclusiveness associated with the brand identity of this automobile manufacturer could ensure that the offered cars pertain to the taste of the rich and super rich category of buyers. However, Imiołczyk (2018) has specified that the competitiveness of the cars manufactured at UK or by UK affiliated companies has consistently experienced steady decline since the previous three decades globally. Gaim, Clegg and Pina e Cunha (2019) have stated that the production numbers of the motor vehicles since 2008, within the UK, has declined from 1,813,894 to 1,750,253. Thus, competitive edge could be derived through the application of personalised marketing policies through a four phase based campaign. The first phase is the launching of events which could involve privately informing the traditional Bentley customers about the product version and the associated qualities through personalised letters. The second one is the one to one marketing process under which the company stores could only entertain one customer on a daily basis so as to concentrate maximised attention value on the individual customers. The third is the private event based strategic marketing through which the product launch events could be designed as per the hobbies of individual customers. Finally, the fourth one is consistently improving the personalised communication methods to keep the customers informed about the latest Bentley product developments.

LO4 Apply models, theories and concepts to assist with an understanding and interpretation of strategic directions available to an organisation.

P4 Interpretation and devising of strategic planning for Bentley Volkswagen

According to Amin and Smith (2017), BVW has to work on the strategic objective concerning positioning itself on the global scenario as a leader in the field of combining luxury with the utilitarian appliances of a car. This is the frame of reference on which the proposal of the structure of the hierarchical analysis of the organisational internal capabilities and the external environmental factors would have to be based. The purpose is to undertake a strategic planning process for the BVW through a quantitative technique. This would be effective in terms of estimation of global value of the propose strategy. The techniques of SWOT study and Analytic Hierarchy Process (AHP) would be integrated to illustrate the case of BVW.

Graphical representation of AHP analysis process

The strategic planning hierarchy for the BVW has been structurally formulated through four levels which are the Organisational Goal (required to be achieved through decisions), the Strengths (S), Weaknesses (W), Opportunities (O) and Threats (T) categories, the factors which are included in the individual categories of SWOT and the final level is constituted by the necessary extent of strategies which could be compared, evaluated and decided upon. Regarding the numeric extension of any Strategy (j), when the value of j could be (j=1,2,3,..n), the following could be observed: (USi,j) is the efficiency measure of the selected strategy to capitalise on the factor of Strength when Si (i= 1,2,3,..ms) (UWi,j) is the efficiency measure of the selected strategy to reduce the factor of Weakness when Wi(i=1,2,3,..mw) (UOi,j) is the efficiency measure of the selected strategy to utilise the factor of Opportunity when Oi(i=1,2,3,..mo) (UTi,j) is the efficiency measure of the selected strategy to minimise the factor of Threat when Ti (i=1,2,3,..mt) Thus, in this context, the Relative Value (Vj) of the selected Strategy (j) could be understood from the following equation:

Strategies

Through the course of the research, 9 strengths, 9 weaknesses, 8 opportunities and 8 threat factors related to the organisational capabilities of Bentley Volkswagen to manage internal and external situations efficiently, have been identified. Cumulatively, these constitute 34 different factors.

The relative significance of each of the factors (SWOT) is the following:

On the basis of the 34 factors, the 6 different strategies have been selected. These are as the following:

1: Broadening the hedonistic value of the cars (fusion of structural and functional excellence with aestheticism and pleasure).

2: Formulation of strategic alliances for better market penetration.

3: Enhancement of production capacity.

4: Greater product diversification.

5: Greater orientation towards hybrid and electric power sources.

6: Providing the customers to customise the cars as per their preferences through addition of specific features (such as lights, colouring and accessories).

M4 Produce a strategic management plan that has tangible and tactical strategic priorities and objectives.

Through the utilisation of the previous equation and the relative significance of each factor, the global value for each of the selected strategy could be arrived at in the following manner:

The values involve the hypothetical estimates which are associated with previously outlined each of the efficiency measures such as USi,j,UWi,j,UOi,j and UTi,j.

Strategy recommendations

The decided upon initial two strategies have outlined comparable global value and this demonstrates the concentrate of similar measure of attention in the application of both of these strategies by the BVW. The standard deviation regarding global value between the first and the fourth strategy is that of less than 1. Thus, the third and fourth strategies have to be provided considerably higher attention by the concerned company in comparison to the initial two strategies in terms of internal and external operations management. Finally, as the standard deviation measure between the first the final strategy is more than 2, the final two strategies require the highest form of attention by the Bentley Volkswagen in terms of global value.

Take a deeper dive into Tesco Plc: An E-Commerce Pioneer with our additional resources.

Reference List

Pardi, T., 2015. A Model to Follow? The Impact of Neoliberal Policies on the British Automobile Market and Industry. In Global Automobile Demand (pp. 37-71). Palgrave Macmillan, London.

Saridakis, C. and Baltas, G., 2016. Modeling price-related consequences of the brand origin cue: An empirical examination of the automobile market. Marketing Letters, 27(1), pp.77-87.

Amin, A. and Smith, I., 2017. Vertical integration or disintegration? The case of the UK car parts industry. In Restructuring the global automobile industry (pp. 169-199). Routledge.

Bailey, D. and De Propris, L., 2017. Brexit and the UK automotive industry. National Institute Economic Review, 242(1), pp.R51-R59.

Begley, J., Collis, C. and Donnelly, T., 2015. Skills shortages: A brake on the British car industry?. Local Economy, 30(6), pp.593-608.

Ewing, J., 2017. Faster, Higher, Farther: The inside story of the Volkswagen scandal. Random House.

Gaim, M., Clegg, S. and Pina e Cunha, M., 2019. Managing impressions rather than emissions: Volkswagen and the false mastery of paradox. Organization Studies.

Loureiro, S.M.C. and Kaufmann, H.R., 2016. Luxury values as drivers for affective commitment: The case of luxury car tribes. Cogent Business & Management, 3(1), p.117.

Moon, H. and Sprott, D.E., 2016. Ingredient branding for a luxury brand: The role of brand and product fit. Journal of Business Research, 69(12), pp.5768-5774.

Rawlinson, M. and Wells, P., 2016. The new European automobile industry. Springer.

Whittall, M., Martinez, M., Sánchez, F.R., Telljohann, V. and Mustchin, S., 2015. Volkswagen Transnational Company Agreements. The meaning of international corporate regulation at work. The Transnational company agreements, p.71.