Political
Environmental agencies are concerned with sustainable products which include how much a car needs to operate which involves steels and other composites which make the structure and the components of the car. Governmental safety agencies are always determined that vehicle manufacturers reduce the possibility that vehicles will crash and reduce the possibilities of deaths from car accidents. Other agencies propose different laws and these can have a such a significant impact on the profitability of a company. If a vehicle was to be found unsafe, then the products can be recalled which can cost a company many millions of pounds.
Another political factor is taxation which usually has a fairly low effect on Jaguar Land Rover. This, however is dependent on the countries in which Jaguar Land Rover operates. Some countries and administrations are very business friendly and provide large tax breaks as long as there are people being employed. Other countries impose taxes on every aspect of the company’s business operations and create a hostile business environment. For example, in Japan the vehicle industry is worried that taxation could cause harm for the industry. They have joined forces with other industries to try and influence the government to decrease the amount the vehicle industry and consumers are forced to pay.
Due to “Brexit” Jaguar Land Rover’s pension deficit has increased from £0.5 billion to £1.46 billion “as investments have tumbled over “Brexit” uncertainty”. This is due to the uncertainty over the future with other countries within the EU as trading will be affected. With the big turn against diesel engines, Jaguar Land Rover is particularly exposed as more than 90% of its UK sales are diesels. Due to this Jaguars car sales has decreased in 2017 for the first time since 2010, showing a decline. Jaguar sales are down 26% so far this year, compared with last year, while demand for Land Rovers in the UK is down 20%. Jaguar’s subsidiary is Tata Motors. In 2017/18 the corporation tax is 19% on a decrease since 2015/16 where it was 20%. Jaguar Land Rover will pay corporation tax on taxable business profits and Shareholders receive their dividends from profits after tax so higher tax rates reduce the likely returns on equity investment and may make it tougher for small, entrepreneurial businesses to raise finance. An estimation that Jaguar Land Rover’s annual profit could be cut by £1bn by the end of the decade if Britain leaves the European Union. The government cutting corporation tax has a positive effect on Jaguar Land Rover, this is because Jaguar Land Rover can keep more of the profit, this then leads expansion and growth, due to the more profit and money available to the company.
Grants are a non-renewable fund gifted by the government or another organisation, for a particular purpose. Jaguar Land Rover will receive these grants for the purpose of manufacturing facilities and training. This has a positive effect on the company, as they are usually expenditure for essentials for the business, therefore it gives Jaguar Land Rover more of an opportunity to gain profit.
Economic
The luxury car segment is one of the most dynamic contributors of revenue growth in the global luxury goods market and is motivated by rising demand from increasingly wealthy buyers in emerging markets such as Brazil, India, the Middle East and China. In 2017, the luxury car market is estimated to have grown 6%. The positive of this means that Jaguar Land Rover will gain more brand awareness. Retail sales of 614,309 vehicles in the year until the end of March as went up by 1.7%. The Ford Motor Company is one of the largest car manufacturers in the world, which is why they are Jaguars main competitors. The vehicle industry is a huge concern in today’s world, because of that, other manufacturers can use pricing which greatly affects the profit margin that a company will see with its own vehicles. How consumers behave has a massive effect on how a company can operate. If a certain model that the company spent millions of pounds on producing is rejected, this could set the company back for years. Commodities like steel, oil and glass are needed in the construction of the composites that make up a car. Also, finished commodities that producers provide will have a great effect on a vehicle manufacturer. The global nature of the industry also means that the company also has to concern itself with fluctuations that occur in currency markets. If a currency’s value increases significantly for what the main company uses, then a car company could see its profits reduce significantly. All of these trends are important, but there has been one that far outweighs any others in the past three year.
The global economy has been in a slight to moderate recession in most areas of the world, and in some places a serious recession has developed. In the United States, two of the world’s largest vehicle makers such as General Motors and Chrysler. These companies had to be provided with government funds so that they would not have to declare bankruptcy. Other manufacturers around the globe were in serious trouble because of the financial crisis with different severities. Anytime a global economic event such as this makes consumers more cautious, it therefore influences large purchases such as luxury vehicles to a greater extent.
The business cycle shows the general idea of the lifespan in the major successful business, like Jaguar Land Rover, this shows the inconsistency, of the business due to their inconsistent performances.
Recession is the period of temporary economic decline during which trade and industrial activity is reduced, this is usually understood, when the GDP has a fall in two successive quarters. The UK economy is expected to hit recession in the next few years, due to the decision to leave the E.U. This then effects loans and investments, as the money put into the business, will have a different worth. Economic recession is, however, the general economic decline, which is usually shows in the stock market, this leads to the increase in unemployment and the decrease in housing market. Recession has a negative effect on Jaguar, as sales and profits results to a decrease in sales and increase in costs.
Economic boom is when the business is on an expansion and reaches the peak point of the business cycle. This occurred in the first months of the decision to leave the EU, as the amount of the goods and services produced, increase for the preparation of leaving. The economic boom is the period where costs is low and sales is high, which is the best period of all businesses, due to the opportunity of profit. In this period this means that sales of Jaguar cars will increase, so employee numbers ad profits will grow.
Monetary
The monetary policy is the process by which the monetary authority of a country. Typically, the central bank which is the Bank of England controls the costs of borrowing short-term or the monetary base. When doing this they often target inflation rate or interest rate to ensure price stability and general trust in the currency. As of May 2018 £1 is currently equal to 1.13 euros. This is a continuous decrease since the announcement of “Brexit” when it dropped to the lowest point in many years. The inflation rate is 2.5% despite the current target being 2%, this means it is slightly higher than the government prefers it so stay which poses the risk for Jaguar’s potential level of sales, this is because customers may be reluctant to spending, due to the high costs. The interest rate at the bank of England is currently 0.5%. When the interest rates are low this is good for Jaguar Land Rover (as they can borrow and expand more quickly) as well as their customers because they will be less likely to save and more likely to invest in purchases such as cars. Low interest rates are good for when people want to purchase a car especially a car especially if it is on lease as some Jaguars can be. This is because the prices become more affordable.
Government policies.
Within UK the current unemployment rate is 4.2% (March 2018), this is decreasing, which means that there is a higher level of people in employment and therefore more people with enough disposable income to put to spend which funds local businesses. The corporation tax is currently 19% which has deceased over time, this is good as it encourages and spurs economic growth. The government also promotes investments which is something significant for businesses such as Jaguar Land Rover, as investments gives them a bigger opportunity to expand.
Social attitudes to savings
An article shown on The Independent website shows that a quarter of British Adults do not have any savings. This means that the a lot of British people are not willing to keep there money for luxury items such as a car like Jaguar Land Rover. A major reason, why people are saving is due to the interest rates being so low, this means that people are not willing to save there money as the interest rate will have little affect on the value of there saving accounts. However the government are predicting that the interest rate will increase again, shown on the diagram of the Bank of England with a little increase after 2017.
Due to many people spending their money, an article from the express shows that 35% of people spend majority of their earnings, within the first week. This shows that people simply can not afford to run a luxury car such as Jaguar Land Rover, which is why Jaguar Land Rover aim for the high earners.
The average UK household debt (including mortgages) was £58,540 in June, according to financial charity The Money Charity. Overall in the UK, people owed nearly £1.6 trillion at the end of June 2018, up from £1.55tn a year ago, this means that less amount of customers are available to purchase luxury cars, due to the lack of availability funds.
Social
All the different factors that affect Jaguar Land Rover come together to effect the company, however it is all dependent on what the consumer wants. This is true especially when a company operates in many different international locations because there is a variety of cultures which influences the consumer’s choices of products. The major luxury car companies will often have different lines of vehicles that they operate in different areas of the world because of the different needs of their customers, this is due to factors such as age and lifestyle such as parents will want a large family car where as a young adult will most likely want a small sports car. This social factor can be divides into different factors such as behaviour, tastes and lifestyle. Behaviour refers to the overall buying psychology of the public. In recent years, buying behaviour has been greatly influenced by environmental concerns. A lot of the luxury car companies have attempted to make sure that they have products available that will appeal to a new class of consumers who want to have as little impact on the environment as possible. Behaviour is a mixture of many factors that must all be weighed by the luxury car industry to determine their relative importance. Taste is concerned with how people view a car and what they want for their personal vehicle. Consumer lifestyle influences the automotive industry because that has to do with what type of car the consumer will buy. Some people can purchase a luxury vehicle, others need to buy a truck for personal or professional reasons, and other consumers will buy an economy car for economic or personal reasons.
Another social factor that has had developed as an effect on Jaguar Land Rover is social media. Customers can connect with other people in a way which they do not have to be face to face and can also be accessible for everyone. Another social factor is the community in general, a car is a way which people judge how wealth a person is, this means that people are more concerned with what they drive and how that affects their appearance, which is why the luxury cars must look classy.
The population growth is 66,573,504, on an increase from last year by 0.59%, this means that there is more people available to purchase these cars. The population in the UK is getting older with 18% aged 65 and over and 2.4% aged 85 and over, this means that people are living for longer, which is positive for Jaguar Land Rover as, as well there is more of an opportunity to increase customers.
Technological
In the luxury car industry, technology and technology change is a factor that is consistently affecting how a company does their business. Technology allows a car company to produce new products that the public will want, but, if a luxury car company falls behind the rest of its industry, then this factor can cause huge amounts of threats and loses to the business. The changes occur over a wide range of components within the vehicle. Most companies are attempting to quickly develop cars that use sustainable fuels or at least use a mixture of fuel types. Safety concerns will often change how a car is designed and what features it must contain to continue to compete in the market. Another issue is that over time consumers want vehicles that are more trendy in the present era. Therefore, designers have to change the look of a vehicle to influence consumers to buy the vehicle. All of these changes require a research and development team that is constantly trying to be at the advanced stages of the advancing technology. Now this means providing new electronic components so that drivers can take advantage of all the newest computer and audio-visual technologies. These changes can cost the company a lot of money. If the company does not guess right as to what changes will be accepted by the buying public, it can be a financial disaster. Most of the Jaguar Land Rovers production is automated, with the likes of robots and machines, this means that although money is spent on equipment and other machinery products Jaguar Land Rover are still saving money, as they are not spending as much on wages and salaries.
New engines that have been introduced will affect the car industry and market. For example, the likes of hybrid and electric engines have been introduced, this means that car companies such as the likes of Jaguar Land Rover must make decisions and changes with these new engines, so they can compete with the other companies and generate more sales. An example of this is Jaguar Land Rover has decided to only make Hybrid and Electric cars from 2020, this is firstly to show that there eco-friendly and second of all petrol fuelled cars are going to become more unpopular through time, therefore it will come to the point where Jaguar Land Rover will simply be losing money on creating these types of vehicles.
Environmental
The laws related to environment friendliness and carbon emissions are starting to have a much stronger affect around the world. Given that all the major players in the vehicle must focus on developing low emission vehicles. The vehicles which are low on emissions and fuel consumption receive tax subsidies and are favoured by the government and law. The pollution tests are now a lot stronger to reduce as much harm as possible and when the vehicles pass these tests they are only are allowed in certain markets including EU and UK. Environment friendliness has become an important test for the vehicle makers in the 21st century as governments have started focusing heavily on pollution control.
In September 2017, Jaguar Land Rover announced that all new Jaguar and Land Rover models launched from the 2020 model year will have an all-electric or hybrid powertrain option and by 2040 diesel cars will be outlawed.
Jaguar Land Rover policies:
Building for the future
At Land Rover, we have high standards in everything we do, including the buildings we work in. As we expand, we want to make sure that any new manufacturing facilities we build, such as our new manufacturing Plant in Wolverhampton, comply with our forward thinking principles and practices.
Sourcing more sustainably
The environmental impact of our operations is not confined to our facilities. In fact, the impacts in our supply chain are greater. So we encourage our suppliers to uphold the same high standards of sustainability as we set ourselves. And we work closely with them to reduce the environmental impact of the products we buy.
Reducing transport impacts
All of our vehicles are designed in the UK, but they are dispatched for sale to no less than 177 countries. How we get them there presents us with more opportunities to think progressively and act efficiently. Such as sharing deliveries with other car manufacturers or reducing delivery miles by sending vehicles directly to dealers instead of via a distribution centre.
Reduce. Reuse. Recycle
Minimising waste is a core concern for our employees and suppliers. As we grow it becomes more important than ever which is why we remember these three Rs everyday across our manufacturing operations.
Recycled aluminium
We now have a closed loop waste recovery and recycling system at our Castle Bromwich production centre, as well as a trial process at Solihull where our new all-aluminium Range Rover and Range Rover Sport models are manufactured.
Reducing emissions
Using low-carbon or renewable energy reduces our reliance on fossil fuels, and enables us to improve energy security and cut CO2 emissions. Combined with energy-efficient measures, this can help us to reduce absolute CO2 emissions even as our production volumes continue to rise.
Source: https://www.landrover.co.uk/explore-land-rover/responsibility/environmental-responsibility.html
Ethical
Jaguar Land Rover have a code of conduct and supporting policies on there website with the message of “Jaguar Land Rover is committed to conducting business fairly and honestly. Our core value of Integrity requires each person working for us or on our behalf to act ethically and to do the right thing. We expect the highest level of ethical behaviour when interacting with customers, dealers, suppliers, government agencies, communities and each other. The Jaguar Land Rover Code of Conduct and supporting Corporate Policies set out the core principles for ethical conduct expected of every person working with us.”
Legal
There are many legal laws towards Jaguar Land Rover. For example one administration may be very environmentally friendly and enact legislation that drastically changes the amount of greenhouse gasses that individual cars can emit. When the administration changes, the new leaders may be more focused on taxation. In this example are the two largest factors that an automotive company must concern itself with when faced with different governments and how the administration deals with regulation and taxation. As well as this is the stability of the government in question. New “Brexit” laws as well may limit the production of cars that are produced, this is due to the lack of resources as trading laws will be hindered.
The national wage is a legal requirement which companies must follow. The reason for the minimum wage is so employees are earning enough money for them to be able to live from. The minimum wage changes depending on the age and inflation. As of now the minimum wage for a 25 and over is £7.83, however Jaguar Land Rover are a luxurious company therefore as expected they provide higher wages than the minimum wage within al industries, with the minimum being £9.50 an hour.
The Equality Act is a legal factor for Jaguar Land Rover and every other company. This act encourages companies to employ workers not influenced by race or gender and to have fair and equal rights. This act was brought in 2010. For Jaguars apprenticeship they promote a policy called “equal opportunities”, which is used to reduce any discrimination or harassment in the work.
2019-3-12-1552434477