Introduction
The automobile industry is very competitive in the present business world. All manufacturers are trying to achieve more markets for their products. The automobile industry has matured and it is reaching a saturation point. Many manufactures are working hard for making innovative products and achieving bigger market shares. The strategy in this area is not only in production but also in marketing. All manufactures are trying to introduce new models of vehicles, with advanced technologies, but at the same time, they wish to maintain the cost of the product. Pricing is also very important to achieve good market performance. The main strategy in the area of product positioning lies in the fact of who buy the products and what the company can offer to that customer. The VIREO MOTORS mainly concentrate on market luxury cars. Their specialty in business is that their vehicles are environmentally friendly. The business practice of VIREO MOTORS is to provide luxury and comfortable driving with environmental protection.
Organization Structure
Financial Analysis
Financial analysis is the total analysis of a firm’s profitability, solvency, liquidity and stability. Profitability of a firm is determined by its income statement. Solvency denotes the capacity of a firm to pay back its debts. Liquidity is the ability to maintain the proper balance between cash inflow and out flow within the firm. Stability, in turn, indicates that the ability of a firms to maintain business for a long term period. It is assessed on the basis of both income statement and balance sheet. Financial analysis includes Ratio analysis, Cash budget, Cash flow etc. Ratio analysis means, not just comparing different figures from the balance sheet, income statement, and cash flow statement. It is comparing the figures against previous years, competitors, present industry standards or even the general economy in vogue. Ratios examine the relationships between individual values and forms fact based opinions on how a company has performed in the past, and may perform in future.
Liquidity Ratios
- Current Ratio = Current Assets/ Current Liabilities = 517 / 54.72= 9.4 Current Ratio = 9.4
- Quick ratio= Quick Assets/ Current liabilities Here Quick Assets = Current Assets – Inventories = 517 / 54.72 = 9.4
- Solvency Ratio = Total Assets/ Total Liabilities = 1459/466 = 3.1
- Gross profit ratio= Gross profit/ sales= 946.62/ 2718.68 = 0.34
Competitive Business
The competitive business of VAIREO MOTORS: The company is mainly concentrating in area of niche high cost luxury vehicles. The key strategy of this company is to exploit the environmental friendly nature of their cars. The company presently having 5.6% market share in the luxury vehicle market their expectation is to achieve 6% market share in the future. In their competitive business the last year company created 1400 new job opportunities.
As evident from the chart above the position of FAS has remained the status quo in the fourth year of operations and they have posted healthy 33% growth in profits between the fourth and fifth year. Regarding Sesto it has slumped from the enviable 2nd position in the to the 14th position in the 4th year, albeit it has registered growth rate of 11% the fall in ranking of this company could be attributed to stronger competitive markets and its inability to retain its premier position amidst stiff competition. Coming to SEC it has shown the best growth rate despite loosing its position from 3rd to 9th. The performance of Arton has lefted scope for concern since it has lost sufficient market share to post a falling profit of 219.18 in the 5th year.
Our company has made a good percentage rate of growth considering the level of competition and has, more or less, also stabilized on ranking. It is widely believed that we need to focus emphatically on increased turn over and rationalization of cost and adopt scientific technique to post higher profits in future years.
Supply and Demand
Demand for a product place a significant role in any business. Whenever the demand is falling, the company may need to undertake some sales promotional activities; but if the demand exceeds the firm may reverse its production plan. Both demand and price occupies a direct relation in market avenues. As per the law of demand, expansion in demand results in fall in price and contraction in demand results in rise in price. Supply and Demand plays very important role in marketing. The company produce their products and market the product on the basis of market demand. Higher demand for product will affect the price of the product. Mainly the company produce and marketing luxury vehicles so the demand for this vehicles are comparatively low level. The company is mainly producing two models of luxury cars PLUTO and ZEUS. It has been understood through comparative studies that the demand for PLUTO is higher than the demand for ZEUS since there is no stocks pending and all the produced items have been sold. It is reasonable to expect that the products of the company, at present levels of capacity utilization, have good demand in the market. Also since labor turn over and absentism is lower when compare to industry standard the company enjoys good productivity. The current trend of production and supply has to be maintained if not enhanced in the future years. There is a positive correlation between supply and demand in the Luxury Vehicles industry since it caters to exclusive clienteles who may not be influenced by pricing alone.
Advanced R&D and Future trends
The VIEREO MOTORS invest a large amount of money in the area of Research and Development. The company’s mission is making environmental friendly products and provide the luxury and comfort of driving this context the company try to develop vehicles with low pollution. The present competitive market situation all manufactures are trying to introduce new model vehicles with advanced technologies Viereo Motors spend a high amount of money for Research and Development activities. They mainly concentrate on the area of environmental friendly vehicles. Last year, the company spend 150 ₤ million for their Research and Development activities.
Legal and PEST Analysis
- Political: The present rate of Inflation this year was 2.86% and is expected to rise to 4% next year.
- Economical: The luxury Car market is expected to shrink by 8%
- Social: The company has created 1400 jobs in the current year which is the second largest job creation compared to the competitors.
- Technological: The Company has earmarked £ 150 million towards Research and Development for enhancing eco friendly vehicle technology and reduced fuel emissions.
Product Life Cycle
- Introduction: It is recommended that the company diversifies into non luxury automobile segments to strengthening its bottom lines.
- Growth: In this stage the company reduces its selling cost interms of advertisement and promotional cost and uses the budget more judiciously for market penetration and making forays in lesser competitive markets where brand leadership and higher returns are assured.
- Maturity: During this stage investments are made in advertisement and sales promotional activities and also for chalking out future strategies and adding impetus to growth.
- Decline: After having reach the Zenith of market the demand for products may show a market decline in conformity with the economic laws. It is during this phase of product cycle that the company resorts to reducing the sales prices and offering discounts and other facilities to customers for consolidating the producer-buyer rapport.
- Customer Profile: The company basically dealing with luxury vehicles which have an assured customer base. Their targeted customers are high profile clientele who purchase cars as status symbols. These customers are not generally affected by reduced pricing since quality and standard of service are of paramount importants to them.
Conclusion and Recommendation
Thus let us conclude that in this particular case VIERIO MOTORS’ overall performance over the last five years which provide a useful information about a clear image of the company. The company mainly concentrating on luxury and comfortable vehicles with low emission. In the present world auto industry has facing a problem of polusion. VIERIO MOTORS advanced technologies help them to overcome this problem and produce environmental friendly vehicles for the future.