In the 1990s, Ford planned the creation of the luxury car division that could involve the car brands similar to Volvo. The division known as the Premier Automotive Group (PAG) was established in 1999 (“Ford Buys Land Rover”).
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During the period of 1999-2008, the PAG included such brands of luxury cars as Volvo, Jaguar, and Land Rover acquired and then sold by Ford because of their non-profitability (Table 1).
Table 1. Ford’s Acquisitions and Sales
|Brand||Date||Acquisition Cost||Date||Sale Cost|
|Jaguar||1989||$2.38 billion||2008||$2.3 billion (with Land Rover)|
|Volvo||1999||$6.45 billion||2010||$1.5 billion|
|Land Rover||2000||$2.9 billion||2008||$2.3 billion (with Jaguar)|
Referring to the table, it is important to conduct the VRIO analysis in order to state why Ford made decisions regarding the acquisitions and following sales.
The VRIO Analysis
The competitive advantage can be gained by Ford when the company utilizes ‘valuable’ (V), ‘rare’ (R), ‘inimitable’ (I), and ‘organized’ (O) resources.
In case of Jaguar, Ford planned to cover the niche of prestigious cars with high driving dynamics, and during a long period of time, the development of the brand addressed the requirements of value, rarity, inimitability, and organized exploitation.
However, the situation changed in 1999, when the PAG was established, and Ford planned to use the centralized approach to managing the operations within the division.
Jaguar cars became set on the common vehicle platforms as other cars of Ford, the sales decreased, and the company chose to buy the brand to the Indian corporation in 2008 (Prokesch par. 2).
The acquisition of Volvo in 1999 was a result of Ford’s strategy to expand the market share in Europe and widen the niche of premium brands. In terms of value, Volvo was discussed as a profitable brand. Rarity and inimitability depended on the high quality and exceptional safety.
Organization depended on the synergy approach within the PAG (James par. 3). However, Volvo became less valuable brand in the 2010s, when Ford focused on uniting the engineering departments within the PAG to decrease associated costs.
As a result, the measures related to rarity and inimitability were also decreased. Ford needed to sell Volvo in 2010 while losing more than 70% of the brand cost (“Ford Sells Volvo”).
Land Rover was acquired in 2000 as one more luxury brand to expand the PAG. The decision was discussed as good for Ford because of the opportunity to focus on the prestigious cars with the high off-road capability. This aspect added to the rarity and inimitability of available resources (Hill and Jones 312).
In terms of value, the acquisition of Land Rover was important for Ford to expand the market share in the area of four-wheel-drive cars.
The aspect of organization was addressed ineffectively because Ford could not rely on synergies in the PAG, but the company continued to use the principle of common vehicle platforms to produce Land Rover cars.
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Thus, the brand was sold in 2008 along with the Jaguar brand because cars decreased in their value and inimitability (“Ford Sells Land Rover and Jaguar to Tata”).
Focusing on the VRIO analysis, it is possible to state that the competitive advantage of Ford decreased significantly after establishing the PAG because the company aimed to reduce costs of production instead of adding to the brands’ uniqueness in terms of rarity and inimitability in order increase their value.
Ford Buys Land Rover. 2000. Web.
Ford Sells Land Rover and Jaguar to Tata. 2008. Web.
Hill, Charles, and Gareth Jones. Strategic Management: An Integrated Approach. New York: Cengage Learning, 2012. Print.
James, S. Ford Acquires Volvo Car Operations. 1999. Web.
Prokesch, S. Ford to Buy Jaguar for $2.38 Billion. 1989. Web.