The report intends to highlight on the challenges faced by Jaguar relating to finance for international trade due to the Trump’s position for penalizing the imports. There has been total of three challenges identified relating to the problem. The latter part of the report has been further seen to address the various aspects of the recommendations for the improvement in the operation of the international business and overcoming of the various types of the problems associated to international trade due to the U.S. customers.
Jaguar is identified as the luxury brand of Land Rover headquartered in Whitley, Coventry in England. The company has been further seen to be owned by Indian company Tata Motors since 2008. The company is seen to be owned by Tata motors from 2008. The company is further seen to be founded Swallow Sidecar Company in the year 1922. Initially the company was involved in manufacturing sidecars before making bodies for passenger car. The company has been further seen to be owned under the brand S. S. Cars which changed its brands to Jaguar Cars in 1945. The main merger activity was seen to take place in 1966 with British Motor Corporation. This further resulted in formation of an enlarged company which was renamed as British Motor Holdings (BMH). The demerger of the company from British Leyland took place in 1984, thereby becoming constituent of the FTSE 100 Index until its acquisition by Ford in 1990 (JaguarUK, 2017).
The main challenge faced due to International trade has been identified in terms of the high cost involved for the appropriate space for storage of the materials and the slow growth opportunities in the industry. Furthermore, the main regulations covering for the retail regulation has been identified to go through tedious and time taking documentation and permissions. It is difficult for the company to grow the business in multiple horizons so that the profits of the business can distributed in effective way. There have been further several challenges which are seen to be associated with the various aspects of the cultural diversity. Tata International needs to handle the procurement of Jaguar, which involves dealing in large quantities of minerals and metals. It has been seen that in various occasions the com needs to go though the several types of the documentation process which involves cross border permissions. This takes lot of challenges in terms of logistics of the materials (Beamish, 2013). This has been seen in terms of differing assigned load capacity to each vehicle in different countries and U.S. in particular. It has been further seen that the increasing nature of the international competition has been another major concern for Jaguar. It has been identified that the main problem associated to the automobile industry has been seen in terms of the innovation in the operations and the distribution process and in particular context of Jaguar the company has been identified to face several challenges associated to the timely delivery of the service for the manufacturing parts. It has been further seen that the various types of the associated regulation process for Government involves the company to go through several procedures which often involves considering the various aspects of the international trade (Tata.com, 2017).
Figure: Sales drop of Jaguar
(Source: Cavusgil et al., 2014)
Based on the Trump’s policy on the import of the cars, the foreign car makers such as Mercedes-Benz, BMW, Audi including Jaguar needs to pay an import tax of 35 percent on vehicles imported into the US (Moneycontrol, 2017). In general any acquisition activity involves challenge in emerging market while the acquisition made by Jaguar are from emerging country while there has been significant amount of concerns which are seen to be associated to the effect on both long run and the internal factors of the business. It has been further seen that in several aspects the business is seen to be affected by the ingredients such as practical implications, social implications and the value in the international trade. During the acquisition of JLR by Tata Motors there had been several inconsistencies observed in the external environment which were associated to the fluctuating market demand in U.S. A more consistent demand of the JLR products was seen with European users of the cars. The various types of the social challenges was further seen to exist in terms of the interest of the stake holders, It was seen that the profits from the international rate was seen to be get affected by the different types of the consideration which was seen to take place from the different interest of the multiple stakeholders. The main form of the adverse effect of the stakeholder was seen mainly in the short term growth, it has been further seen that a great number of the challenges faced by the JLR was seen in terms of the value which was seen to be affected by the difficulties in the cross border transactions by the emerging market. The main problems seen in the acquisition was seen the short term during the cross border transactions and formulation of the strategies (Dunning, 2014).
JLR was able to increase the sales from China in 2009 by an amount of £250 million and more than £8 billion in 2014-2015. This allowed JLR to double the workforce in UK. The success of Jaguar to export British goods in U.S. was seen in terms of billions of pounds. The company was seen to enter into the challenges in entering into the deal with U.S. due to increased import taxes. The deal was never seen to be successful due to the problems for Trump’s policy on the imports. This was due to British companies agreeing to provide the products which were seen to be manufactured outside the boundaries of U.K (Cavusgil et al., 2014).
Figure: Drop in volumes sold by Jaguar in U.S. Market
(Source: Cavusgil et al., 2014)
Based on the recent reports published by the financial times, it has been seen that the introduction of tariff rates after British leaving EU, has made the business highly uncompetitive in nature. As said by Hanno Kirner the trade barrier would not only affect the sales of the products but would also make the business highly uncompetitive in nature not only in U.K. but also parts of U.S. This is also seen to have several adverse impacts on the business operations. Several concerns have been also raised by “The Society of Motor Manufacturers and Traders (SMMT)”, as the operations of the business can be jeopardized in case the business is not a single market (Ft.com, 2017).
U.S. is identified as the ideal destination for creation of a plant based in locations in the U.S. and Mexico. It has been also seen that a significant support of 18000 jobs were seen in U.S. through its suppliers and plants and suppliers and these seen to be dependent on the exports. Europe also has been identified as the one of the biggest market in terms of the sales of Jaguars and due to the presence of the EU the sales of the company in 2015 was seen to be doubles and the sales of Land Rover was seen to rise by 20%. Most of the parts of the supply chain of the company are seen to be present in Europe with 40% of JLR’s purchasing budget spent in the continent. The imposition of tariff would impose significant penalization on JLR from buying from EU (Picciotto & Mayne, 2016). It has been also seen that the there has been skill gap added between UK and the rest of the world, for the various types of the trained engineers, and this also means that the access to the global talent is seen to be conducive for the operations of Jaguar. Most of the investment has led to high current auto renaissance in UK which has been made in the single market. It has been further observed that the manufactures are privately worried about the impacts of the vote of Brexit and the ability of UK plants attract new investors in future years. As the car plants compete with each other for the production of the latest models, the British plant is particularly in risk of becoming uncompetitive for the tariffs being imposed. On the other hand Toyota, this is seen to export more than 10% of which were imposed on the sales to EU (Ft.com. 2017). There have been several concerns associated to the other motor manufacturers and Jaguar Land Rover as the future of trading relation with EU will impact directly investment decisions associated to Nissan at Washington, Tyne & Wear (Brannen et al., 2014).
Remedy for International Competition and Operational Challenges
The main form of the recommendation to the different types of the international competition has been seen in term of the utilizing each other’s competencies. For example, Jaguar needs to continuously learn from the changing technology and increasing demand. The company needs to maintain separate cost structures in U.S. The company needs to effectively calibrate the rental costs and the expenses associated to supply chain of the various supplies (Bouz et al., 2014). It further needs to source the best suppliers who will be able to provide the best price without compromising with the quality. The company needs to further evaluate the customer expectation of the different countries, for example the customer expectation in U.S. will be different from that in Europe. The company also needs to adopt the various operational remedies based on the geographic locations and ensure the implementation of the latest technology in terms of the distribution and procurement of the materials. JLR is further needs to take the initiative to setup up the manufacturing plants near ports (Wild et al., 2014).
Jaguar needs to seek to take initiatives to setup the operation in U.S. so that is able to avoid the taxes on the import duties. The company can improve the cross border acquisition process by opening up of receptions for the sales and engineering offices in parts of U.S. The automotive service will be conducive in guiding the company in representing the issues in a better way. The relevant representative should be associated to the acquisition of the other automobile industries. It has been further seen that the various types of the improvement can be made by the company by knowing about the relevant documentation process involved in cross border trade from beforehand, by doing so the company will be able to ensure a speedy delivery of the relevant formalities. It has been further seen that putting an augmented focus on the social challenges and taking into considerations the stakeholder’s onion will help the company in addressing the cultural issues. The company further needs to take actions in reducing widening gap in falling exports and work on the deficits. JLR needs to understand the restrictive banking and insurance regulations which is seen as the key indicator to hinder the investment in U.S. (Rogerson, 2017).
JLR needs to enter into possible merger with Japanese car manufacturers to be able to pull the investments or divert it to EU before Brexiters face up to the economic catastrophe in the delivery process. The company also needs start differentiating in terms of Tariff free trade in goods so that it is able to help this rebate to get a more specific answer to the challenges in U.S. as well as EU. The company has been observed with the scope to earn more from the manufactured exports than from the various types of the services which are seen to be associated to manufacturing. It has been further seen that 10% of the economy and services is approaching 80%.The company has more scope of improving the foreign earnings from the export operation by involving in manufacturing rather than involving in providing services. In addition to this the manufacturing process is not seen to be labor intensive so the demand of only few immigrants needs to be covered under the skill defect. Manufacturing is seen to build up easily as the products are able to become more established in the market of overseas and involving complex customizing process (Eicher, 2016).
Conclusion
The main problem in terms of operational challenges in international trade has been seen with high cost involved for storage needs of the materials and the slow growth opportunities in the industry. The international retail regulation has been identified to go through tedious and time taking documentation and permissions. It is difficult for the company to grow the business in multiple horizons so that the profits of the business can distributed in effective way. The remedy for this has been identified with maintaining separate cost structures in UK, Europe and India. It has been seen that the introduction of tariff rates after British leaving EU, has made the business highly uncompetitive in nature. The trade barrier would not only affect the sales of the products but would also make the business highly uncompetitive in nature. In order to address this issue Jaguar needs to enter into possible merger with Japanese car manufacturers to be able to pull the investments or divert it to EU before Brexiters face up to the economic catastrophe in the delivery process. The discourse of the study has further revealed that during the acquisition of JLR by Tata Motors there had been several inconsistencies observed in the external environment which were associated to the fluctuating market demand in UK. JLR has the scope of improving the cross border acquisition process by opening up of receptions for the sales and engineering offices in parts of England.
References
Beamish, P. (2013). Multinational joint ventures in developing countries (RLE International Business). Routledge.
Bouz, F., Escamilla, T. D., Krawczyk, H. M., & Rabin, T. D. (2014). U.S. Patent No. 8,646,062. Washington, DC: U.S. Patent and Trademark Office.
Brannen, M. Y., Piekkari, R., & Tietze, S. (2014). The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
Dunning, J. H. (2014). The Globalization of Business (Routledge Revivals): The Challenge of the 1990s. Routledge.
Eicher, S. (Ed.). (2016). Corruption in international business: The challenge of cultural and legal diversity. CRC Press.
Hard Brexit will leave us uncompetitive, says Jaguar Land Rover. (2017). Ft.com. Retrieved 9 July 2017, from https://www.ft.com/content/8858900c-854c-11e6-8897-2359a58ac7a5
Luxury Sports Cars, Executive Saloons and SUVs | Jaguar UK. (2017). Retrieved 9 July 2017, from https://www.jaguar.co.uk/index.html
Moneycontrol. (2017). JLR cautious over Trump policy, will wait and watch for now. [online] Available at: https://www.moneycontrol.com/news/business/companies/jlr-cautious-over-trump-policy-will-waitwatch-for-now-1004181.html [Accessed 13 Jul. 2017].
Picciotto, S., & Mayne, R. (Eds.). (2016). Regulating international business: beyond liberalization. Springer.
Rogerson, B. (2017). Jaguar Land Rover’s ongoing investment in China hides serious Brexit challenges. Asset Finance International. Retrieved 9 July 2017, from https://www.assetfinanceinternational.com/index.php/auto/asia-pacific/auto-asia/14918-jaguar-land-rover-s-ongoing-investment-in-china-hides-serious-brexit-challenges
Tata.com. (2017). ‘The biggest challenge is cultural diversity’ via @tatacompanies. [online] Available at: https://www.tata.in/article/inside/The-biggest-challenge-is-cultural-diversity [Accessed 9 Jul. 2017].
Wild, J. J., Wild, K. L., & Han, J. C. (2014). International business. Pearson Education Limited.
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