Essay: Analysis Of External And Internal Strategic Factors Impacting Aston Martin.

Aston Martin established in 1913 is identified as a global leader in the luxury sports car market. The company has been symbolised with exclusive performance, innovation, sophistication, beauty, power, elegance and exclusivity. In this regard, the brand has been identified with exceptional standard of design and styling. The main market segment is evident in form of HLS car market which offers world-class technology, distinctive model line-ups and engineering capabilities (Astonmartinlagonda.com. 2022a). The vision of the company to provide unique combination of ultimate luxury and high performance together in one automobile. The company further forward to being more efficient and agile in the luxury car segment for providing the best service to the customers and other stakeholders. The discussions of the report have been segregated into three tasks. In the first task, the analysis of the industry structure has been performed with the use of PESTEL model. Furthermore, the important external strategy issues have been also concluded as whether it is an opportunity or threat. The second task of the report has performed an internal analysis in which value chain concept map and VRIO has been used for identification of the core competencies. Lastly, in the third task TOWS matrix has been used for recommending a new strategic option.

Political

The main political factors impacting the group can be identified with the lower taxation policies throughout the operating segments in the western hemisphere. This has resulted in increased spending and higher profits in the development and research division. In this regard, the stability can be identified to contribute as an opportunity across numerous countries with specific requirements (Deepak and Jeyakumar 2019).

Economic Factors

The recent slump in the annual GDP growth rate in the UK economy can be seen as the main threat pertaining to easy availability of liquidity in the equity market and act as a hindrance to further expand the presence of Aston Martin globally. Such a trend can be referred with the sudden drop in the annual GDP growth% as referred in the figure below: 

Figure 1: Drop in the UK annual GDP growth rate by -9.694% in 2020

(Source: Data.worldbank.org. 2022)

Social Factors

The important form of social factors impacting the business of Aston Martin can be seen with favourable attitude towards safety and health, gender roles, level of education, leisure interests, societal hierarchy and societal norms. In this manner, such factors they were the present business of business in the UK.

Technological Factors

The technological innovation fast disrupting the supply chain has been able to provide greater access to information to not only the present partners of the company but also a greater number of players in the consumer cyclical industry (Panchenko et al. 2020).

Environmental Factors

For the last 10 years environmental factors and sustainability have become an important aspect for the business. Pressure groups and governments are asking the organisation for following the relevant environmental standards. The recent developments in the environmental factors have been conducive for further opportunities to expanding the business in other countries (Adams, Freitas and Fontana 2019). 

Economic Factors

Figure 2: Aston martin environmental efforts for reducing CO₂ footprint

(Source: Amsc-prod-cd.azureedge.net 2022)

Legal Factors

The important form of legal factors influencing the business can be seen with complying with the health and safety norms, data protection laws, business laws and employment law. As a result of other countries of presence of Aston Martin following different international legal norms, there is a significant threat in terms of time taken to resolve business cases in the court (Park 2020).

The industry attractiveness using the 5 forces model has been discussed below as follows:

Threat of New Entrants - Low

Entry in the present market segment of automotive in the UK requires a considerable amount of resource investment and capital. In this context, a company like Aston Martin faces minimal threat of entrance of new forms in the market. This is due to the fact that new players in the market need to fulfil time-consuming and strict regulatory requirements (Kotabe and Helsen 2020).

Bargaining Power of Buyers of Aston Martin - Low

Aston Martin has several strategies for diversifying customer base, thereby effectively managing the bargaining powers pertaining to the buyers. It is mainly done by introducing models for new target segment and adaptation of the diversification strategies associated with the product (Hutt and Speh 2021).

Threat of Substitute Products and Services - High

The availability of substitute products for Aston Martin is considerably high as a result of several other brands such as Lotus, Land Rover and Rolls-Royce provide substitute products with very switching costs.

Rivalry among Existing Players - Moderate

The rivalry among the existing firms for the company is considerably low as a result of the number of players in the market. However, the presence of differentiated product by competitor companies such as Bentley, McLaren, Lotus, Land Rover and Rolls-Royce has made it moderately tough for Aston Martin to compete within the industry.

Bargaining Power of Suppliers - Moderate

Based on the available information on the website of the company, the suppliers have seen to be concentrated in specific region and the consideration is higher than their buyers. In this manner, the forward integration implemented by a large number of suppliers has made it moderately tough for Aston Martin to retain its competitive position in the market (Chernev 2018).

The human resource at Aston Martin follows a policy of managing people as per in-depth policy formation along with developing skills for analysis. In this manner, the broader discipline of HR strategies accredited by the CIPD course (Aston.ac.uk 2021). The physical resources in terms of total assets have been identified with the increasing trend. This is evident with increase in the total assets from GBP 2,097.53 in 2018 to GBP 2,231.1 in 2019 and GBP 2,794.8 in 2020. In terms of financial resources, the table below illustrates the deteriorating profitability metrics, debt ratio metrics and accounting ratios to intangible computed using goodwill to asset ratio (Astonmartinlagonda.com 2022).

Table: Financial ratio and intangibles

(Source: Capitaliq.com 2022)

In terms of support activities such as firm infrastructure, human resources, technological development and procurement, the company has demonstrated an effective growth in terms of expanding its business across 160 locations in 53 different countries for putting a large array of company infrastructure and support network. Moreover, as mentioned previously, Aston Martin follows in-depth policy formation along with developing skills analysis for focusing on its human resource strategy. The procurement activities such as inbound Logistics, outbound logistics and operations is maintained as per the partners of the companies such as Amazon, Juniper networks, Bombardier and Epos (Astonmartinf1.com 2022).

Social Factors

What – Ansoff Matrix

Based on the consideration of TOWS analysis it can be clearly seen how Aston Martin faces several challenges in terms of small selection range of model which limits the consumer choice along with lesser market in comparison to other companies. Based on such a factor, it needs to strengthen its product base associated with electric vehicles. In this regard, it needs to take into consideration the present electric vehicles market in the UK. It is worth noting that the number of electric cars sold in the UK has increased by two times as the consumers are looking forward to more environmentally friendly mode of transportation. It is for the award noting that more than 22,000 pure electric vehicles were seen to be registered in November 2021 and more than double the amount was registered during the same month in the previous year (Lacobucci 2021). In this manner, the model three of Tesla was seen to be the third bestseller in the UK market itself with selling more than 2077 units as per the data obtained from “Society of Motor Manufacturers and Traders (SMMT)”. It is further worth noting that the boom in the electric car sales during November 2021 by up to 1.7% provide a clear indication that Aston Martin will be able to work on its present strength such as excelling in quality in comparison to many powerful brands and creating value for the organisation by switching to a differentiated market in the UK by consideration of producing electric vehicles (Naudé and Sutton-Brady 2019).

How- Organic

The organisation already has set its goal that by 2026 would be switching to production of pure EV. In this regard, even by being recognised as a small automaker, Aston Martin needs to be agile and flexible in meeting the requirements of the customers without making big pronouncements. It goes without saying that even by being a luxury brand, the company will be able to focus on electrification (Brown, Foroudi and Hafeez 2019). Therefore, by 2024 Aston Martin will launch its Valhalla hybrid model as a stepping stone into electrification. Aston Martin has traditionally built parts having two doors, so it needs to considers its successors such as DB11 for launching its first electric car. In addition to this, Moers has also expressed its interest in pushing the performance of the brand and consider needs of the customers. It is worth mentioning that the CEO of Aston Martin needs to emphasise on building a dedicated EV engineering team for reducing its dependency on other partners in providing key components such as drivetrain and batteries (Hua 2019).

The suitability of entry into the segment of pure EV can be identified with addressing the key threats and opportunities. This is particularly evident with how by introducing the new EV, Aston Martin will be able to better compete with other brands such as Bentley, McLaren, Lotus, Land Rover and Rolls-Royce (Tanasiichuk et al. 2019). In addition to this, the opportunities such as better after sale service and scope of expansion can be converted into reality sooner by opting for the strategy (Di Benedetto and Lindgreen 2018).

Technological Factors

The proposed strategy will be further able to meet the shareholder’s expectation and take into account the acceptable risk factors such as increasing cost of fuel and depletion of non-renewable sources of energy (Visconti, Peñaloza and Toulouse 2020).

The proposed strategy would be able to work in practice as the company has sufficient human resource to work upon new skills needed for the EV implementation. Moreover, it also ample amount of physical assets to proceed with such a strategy (Bagozzi et al. 2018).

The essay has provided me with the opportunity to explore the industry structure of Aston Martin using tools such as PESTEL analysis. In addition to this, I was also able to learn about external strategy issues it has been taken into account as an opportunity or threat. The assessment has helped me in implementation of some of the other models such as VRIO and TOWS matrix. As per the conduction of the PESTEL analysis, we are able to learn that the lower taxation policies throughout the operating segments in the western hemisphere is seen as the main opportunity towards further building its present operations. In addition to this, I will also learn how the economic factors can influence the business that Aston Martin which is evident with slump in the annual GDP growth rate in the UK economy, thereby possessing threat pertaining to easy availability of liquidity in the equity market and act as a hindrance to further expand the presence of Aston Martin. Some of the other implementation of models such as five force analysis has been conducive for stating how there is lower threat of new entrants and bargaining power of buyers. Moreover, I will also able to know that Aston Martin has moderate rivalry among existing players and bargaining power of suppliers.

The assessment has helped me knowing about the unique resources of the organisation such as following an in-depth policy for developing skills within the organisation. Moreover, HR policies are seen to be directly accredited by the CIPD course. That is of physical resources provided me the idea about how the physical resources in terms of total assets have been identified with the increasing trend for Aston Martin. The assessment has helped me knowing about relevant value chain activities of the firm based on infrastructure, human resources, technological development and procurement. I was able to learn that procurement activities such as inbound Logistics, outbound logistics and operations is maintained as per the partners of the companies such as Amazon, Juniper networks, Bombardier and Epos. The application of VRIO model has further helped me know about sustainable competitive advantage can be provided in the long-run in relation to the E-commerce opportunities using the existing IT infrastructure. The set of new strategic has been suggested with implementation of pure EV vehicles by 2026. For the purpose of converting such an opportunity, Aston Martin needs to be agile and flexible in meeting the requirements of the customers without making big pronouncements. It goes without saying that even by being a luxury brand, the company will be able to focus on electrification. 

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