Martin manufacturing company case study

For the exclusive use of X. Zhang, 2020. 9-617-033 FEBRUARY 3, 2017 VISH V. KRISHNAN KARIM R. LAKHANI AMRAM MIGDAL Aston Martin: A Second Century of Performance and Luxury In March 2016, Aston Martin Lagonda Ltd. (Aston Martin) premiered its DB11 sports car at the Geneva Motor Show. The DB11—the first new Aston Martin platform in over a decade—was the first milestone in Aston Martin’s seven-year Second Century Plan, CEO Andy Palmer’s strategy to revitalize the company as it embarked on its second hundred years of operation. Since its founding in 1913, the English automaker had maintained a legacy of crafting bespoke, high-performance luxury and racing cars (founded in 1906, the Lagonda car company was even older). “Owning an Aston Martin is about expressing one’s personality and appreciation for power and refinement,” Palmer said. “DB11 continues that tradition. It reinvents and resurrects what a contemporary Aston Martin is.” The automotive industry was in the midst of a digital tornado with the arrival of autonomous, internetworked, clean energy-propelled vehicles. Recent entrants such as Tesla were capturing the mind share of customers and automotive industry analysts. Palmer’s Second Century Plan called for Aston Martin to diversify into new vehicle categories and increase overall production volume in an effort to boost earnings without compromising Aston Martin’s reputation for exclusivity, style, and engineering. As one of the few luxury car companies not backed by a larger automaker, Palmer and Aston Martin faced the challenge of funding development of new vehicles and maintaining a position of leadership in automotive design. “The big question is whether the Second Century Plan has us departing from our traditional role as a sports car and luxury manufacturer and moving into new segments, new businesses,” said Palmer in late 2016. “Is that a wise choice? How does a high-end premium provider in any business grow without losing its exclusive reputation? That is the eternal business question.” The Global Auto Industry In 2016, the automotive manufacturing industry was global and highly concentrated. For years, larger automakers had acquired smaller brands in an effort to diversify their respective product portfolios. They offered makes and vehicle models across the entry, mass-market, premium, and luxury segments. (See Exhibit 1 for leading automakers.) Cars, trucks, and sport utility vehicles (SUVs) in the entry and mass-market segments were generally available at less than $30,000 and included the bestknown and bestselling brands. At a higher price point were premium brands, such as BMW, Audi, and Professor Vish V. Krishnan (Rady School of Management, University of California, San Diego), HBS Professor Karim R. Lakhani, and Case Researcher Amram Migdal (Case Research & Writing Group) prepared this case. Professors Krishnan and Lakhani contributed equally to the development of this case and are listed in alphabetical order. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2017 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by Xi Zhang in Mktg 4501 Sections 002 and 004 2020 taught by Sara Honovich, Temple University from Jan 2020 to May 2020. For the exclusive use of X. Zhang, 2020. 617-033 Aston Martin: A Second Century of Performance and Luxury Mercedes-Benz, which could retail for up to $100,000. At the top of the market were luxury brands, which were generally only affordable to wealthy individuals. Consolidation and diverse product portfolios allowed the big manufacturers to save on development by sharing modular components across product lines. Often, outwardly distinct makes and models in different market segments were, in fact, based on the same underlying design platforma and shared parts from engines to electrical systems, body elements, and infotainment features (built-in information and entertainment technologies). For instance, the Volkswagen (VW) Touareg shared the same 3.6 liter 6-cylinder (V6) engine and other elements of its platform with the Audi Q7 and had components developed both independently and collaboratively by VW, Audi, and Porsche. Likewise, the Audi Q7 shared much of its structure with the Bentley Bentayga, an SUV from VW’s luxury marque. (See Appendix A.) Luxury Market Together, premium and luxury cars and trucks amounted to 14% of global sales volume (out of 68.6 million passenger cars worldwide)1 and 60% of industry profits.2 Prices for luxury vehicles could start at well over $100,000. Production volumes were in the tens of thousands annually, a fraction of the millions of units that bestselling mass-market brands produced each year.