Study of the Ecomic Environment of Bentley Motors

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Bentley Motors Ltd
A strategic economic analysis By Ravi Sibal M908 Business Economics and Strategy: Company Study Brief 11/18/2011 Ravi Sibal Distance Learning 1

• Introduction to the automotive industry • Use SCP framework to explain economic factors impacting the automotive industry • How this has effected Bentley Motors • Current/future issues effecting the industry


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Company Overview
• Bentley Motors was formed in 1919 with By W.O. Bentley and has undergone some interesting changes through the years including a long standing merger with Rolls Royce Motor Cars • They has a brief spell in which they where owned by BMW. • In 1998 they where acquired my Volkswagen to be a part of their family of brands, including Audi, Lamborghini, Bugatti , Seat and Skoda. • Sales strategy – to build one less car than there is demand for 11/18/2011 Ravi Sibal Distance Learning 3

Auto Industry overview
• One of the worlds largest manufacturing industries
– – – – Very dependant upon global growth Sales are tied to peoples feeling of wealth Profitable Above average growth over recent years

• UK economic benefits
– Very small economic benefit to the UK, no major UK owned manufacturers left – Very little value in export market from the UK for volume producers due to high labor costs


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Bentley’s Competitive Environment

Ultra luxury sector

Bentley’s competitive environment has changed since 1998, with acquisition of different brands by different players within the market. During the early 2000’s whilst Bentley was focusing on expanding it’s reach downwards a number of products came out to challenge it’s top end products. These where the Rolls Royce Phantom (Rolls Royce now being owned by BMW) and the Maybach 57 and 62 (Owned by Mercedes Benz) These products changes the dynamic for Bentley Motors and meant they needed to be much more focused on product cost optimization and volume in new markets where they had an established clientele and dealer network. These acted as barrier to entry for these new competitors. Ravi Sibal Distance Learning 5

Upper luxury sector


Global Vehicle Production

Source: International Organization of Motor Vehicle 11/18/2011 Ravi Sibal Distance Learning Manufacturers (OICA).


Factors effecting structure
• Steels costs and Oil prices have a dramatic effect on both the cost to produce and sales volume of cars. • High design cost, infrastructure costs and increasing global legislation on safety and emissions are a barrier to new entrants


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Growing markets BRIC
The impact of the BRIC market has a major impact on automotive firms. China and India in particular impose significant import barriers (up to 100% import tax). This encourages automotive firms to build in country production facilities to supply the domestic market. For Bentley the effect is even greater. It has to gear up years in advance to ensure its supply chains can cope with long term swing in demand, effecting everything from it’s dealer network to it body fabrication and production mix. The growth of demand from these regions and swing from the main markets being in the West to being in the East has meant that Bentley has had to pay closer attention to the exchange rates in these countries. Where as it used to focus on the US dollar as the US was it’s key market. 11/18/2011 Ravi Sibal Distance Learning 8

Effects on structure
• Barriers to entry
– have meant that there has been significant consolidation with in the industry, players have come together to reduce product development and technology costs.

• Greater leverage
– Fewer but larger players have more leverage over raw materials producers – Automotive firms operate in close partnership with steel firms

Market structure • The consolidation of the market in a...
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