With reference to the case below, you are required to apply the relevant External Analysis model that best fits the rivalry that is rife between the brands. Apply the model and discuss at least two of the relevant constructs. You might include in your answer how a new entrant might disrupt the industry.

The Case

Mercedes Benz, BMW, and Audi have long been direct competitors in the German luxury performance car market. They are renowned for their ‘German engineering, which is well-known for its quality and reliability throughout the world. Whilst all three sell their products worldwide, thus competing with all other car brands on the global market, their similarity and home base make them fierce competitors against each other whilst simultaneously appearing to the rest as a powerful collective block.

Each of them offers products in all three market segments, namely large, medium, and small luxury performance cars. All three are benefitting from fast economic growth in non-traditional markets, such as China, Singapore, Malaysia, etc. In response to the growth in demand, all three are investing in China to expand production and sales.

To continue to service their more traditional Western markets, each brand is introducing new models so as to continue to grow sales closer to home. Their strategies include lower-priced models that appeal to younger and/or less-affluent buyers, in an effort to capture some of Ford and GM’s market share, particularly in the USA. Honda and Toyota are also being targeted by the likes of Audi’s A3 Sedan. BMW developed a lower-priced version of its 320 series, and Mercedes offered the CLA four-cylinder, competitively-priced smaller car.

It could be argued that BMW was first to see the potential for smaller German luxury cars that did not have price as a barrier to entry when they took over Mini and branded it as a mini-BMW.

Diesel engines appear to be more popular in China as well as the USA. It is interesting to note that Mercedes, Audi, and BMW joined forces in the creation of a website, called clearlybetterdiesel that promotes diesel’s fuel economy and reduced environmental impact.

To better serve the needs of younger customers, all three companies are rethinking their designs, everything from in-dashboard entertainment and smartphone-driven multimedia systems, to a renewed emphasis on fuel efficiency, as opposed to horsepower.

As is often the case with strategic groups, the rivalry between these three German luxury performance car brands has continued over many decades and we can anticipate that it may remain as intense into the future. It has been speculated that the one thing that could impact them all significantly would be the emergence of another global luxury brand that employs disruptive technology.

Question 2

Apply the Porter Generic Strategy Model using the facts given in the case below:

The Case

There are two leading Australian specialty retail department stores, namely Myer and David Jones. Both are well-established in the major Australian cities and both have good quality branded clothing ranges. The future looks bright for both from a demographic perspective, with rising population and per capita income levels in Australia. The market for such specialty department stores has been growing at around 7% per annum, which has exceed the growth of standard department stores, which was just 2%. David Jones was acquired in 2014 by South Africa’s Woolworths group for A$2.1billion. Woolworths also acquired the Country Road brand.

David Jones’s differentiation strategy has since been fine-tuned. Iain Nairn, who was CEO at the time of the take-over, claimed that change was necessary to take advantage of the huge potential market because David Jones was perceived to have ‘lost its way’. He introduced a few strategic initiatives in an effort to set David Jones apart from its biggest rival in Australia, Myer. Those included:

• Using credit card data to improve promotions and sales
• Offering incentives to staff
• Focusing more on Asian consumers
• Upgrading the store décor and functionality (a A$400million investment)
• Including Country Road inside the David Jones stores
• Including more specialty brands within David Jones locations, including Witchery and Mimco. (private label brands carry a higher profit margin)

Better service at more attractive shops will most likely attract more customers. But Myer is doing the same, so the race is on. Nairn has been succeeded by John Dixon, a veteran of British retailer, Marks, and Spencer. Dixon set about improving David Jones’s food business, believing it would encourage customers to remain in-store across lunchtime if he made food halls more exciting, with different aromas to attract people like a magnet. He sees David Jones as being the ideal Australian specialty department store.

Question:3

Use the case study below to explain Vertical Integration

The Case

Apple’s ownership of its own branded stores set the firm apart from computer makers such as Hewlett-Packard, Dell, and Lenovo that only distribute their products through retailers like Best Buy and Office Depot. Employees at Best Buy and Office Depot are likely to know only a little bit about each of the various brands their store carries. In contrast, Apple’s stores are popular in part because store employees are experts about Apple products. They can therefore provide customers with accurate and insightful advice about purchases and repairs. This is an important advantage that has been created through forward vertical integration.

Question: 4

Suppose your company in Australia wants to expand internationally and is considering either Indonesia or Chile. Apply a CAGE framework to support your decision.

Question:5

Apply your knowledge of Board Responsibilities and Corporate Social Responsibility to the case below:

The Case

In September 2015, what has become the world’s largest automotive scandal began to unfold as US regulators charged Volkswagen (VW) with using software in some of its diesel engines that could fool emissions tests into thinking the affected vehicles were within permissible US pollution limits. What followed has been two years of investigations, admissions, lawsuits, penalties and disclosures that have affected not only VW but the entire automotive industry. VW has been in crisis management mode ever since, seeing a scandal that it initially blamed on a few rogue engineers reach into the top levels of its corporate structure and resulting in billions of dollars of fines. How did one of the world’s most respected and largest automakers handled the events that even a top executive called an “existence-threatening crisis”. It was “an important milestone for us on the way towards clearing up the problem that we caused some time ago,” said the new CEO in September 2015 after his predecessor, Martin Winterkorn, was forced to quit over revelations that the company had used secret software in its diesel cars to cheat emissions tests.

Question: 6

The Case

The key to our success is to be more convenient and provide a better overall experience for the customer. Express Oil Change and Service Centers outperform the industry significantly in terms of customer transactions per day and store sales, for a host of reasons. In terms of customer convenience, Express Oil Change is faster than most of our competitors—we do a ten-minute oil change while the customer stays in the car. Mothers with kids in car seats especially enjoy this feature. We also do mechanical work that other quick lube businesses don’t do. We change and rotate tires, do brake repairs, air conditioning, tune-ups, and others.

There is no appointment necessary for many mechanical services like tire rotation and balancing, and checking brakes. So, overall, we are more convenient than most of our competitors. In terms of staffing our stores, full-time workers are all that we employ. Full-time workers are better trained and typically have less turnover. They, therefore, have more experience and do better quality work.

We think incentives are very important. We use a payroll system that provides incentives to the store staff on how many cars are serviced each day and on the total sales of the store, rather than on increasing the average transactions by selling the customer items they did not come in for, which is what most of the industry does. We don’t sell customers things they don’t yet need, like air filters and radiator flushes. We focus on building trust, by acting with integrity, to get the customer to come back and build the daily car count. This philosophy is not a slogan for us. It is how we operate with every customer, in every store, every day.

The placement of our outlets is another key factor. We place our stores in A-caliber retail locations. These are lots that may cost more than our competitors are willing or able to pay. We get what we pay for though; we have approximately 41% higher sales per store than the industry average.

Required:

As a Management Consultant to Express Oil, outline how the company can apply each of the following models: PROFIT, VRIO, and SWOT, so as to determine which ‘Exploit-type strategies’ will keep them ahead of the competition.