The cost reduction to bring about price reduction and cost leadership is a key success factor. This is especially important in light of the intense global competition, which results in price wars. Therefore continuous improvement in productivity and the use of efficient production processes is crucial.
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STRATEGIC GROUP ANALYSIS.
Johnson & Scholes (1999) define strategic group analysis a means of identifying organizations with similar strategic characteristics, following similar strategies or competing on similar basis. Michael Porters (1980) Competitive Strategy approach has been applied.
This aids in ascertaining whether synergy is coherent and suitable.
Products -.
The companies had two different products with Rover flagship brand being the Hardy 4- Wheel drive range and BMW producing luxury cars. From the product range point of view the two firms did not have synergy.
Geographical Coverage-.
Rover was active in the European and Japanese markets, while BMW was in the European and US markets. Synergy exists in markets.
Market Segment Served-.
Rover was serving the middle and lower middle class, while BMW served the exclusive upper class. Regarding market positioning, no synergy existed.
Technological Leadership-.
Rover leads in 4- Wheel drive technology and BMW in diesel engine technology. No synergy here.
R&D capability-.
BMW had higher capability than Rover as can be seen in Logistics technology did. Rover was better in 4WD technology. There was synergy here.
Branding-.
Rover emphasized on brand name, while BMW's emphasis was on brand identity. Again there is no synergy here.
Marketing effort-.
BMW comparatively aggressive, Rover not as much.
Product Quality-.
Both are very high. No synergy as regards this aspect.
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Pricing Policy-.
BMW on premium pricing for upper niche market. Rover pricing based on low cost for competitiveness. Again no synergy.
Capacity Utilization-.
Rover had low capacity utilization than BMW. In this respect there was synergy.