Long term goals
- Autoliv want to become a global company, MNC (Multi-National-Company) and hope to make a profit.
- With its successful growth strategy, Autoliv has become the global leader in the $13 billion automobile occupant restraint market. Airbags account for 52% of that market, seat belts for 28% and electronics for 20%.
- Autoliv estimates that it currently has approximately one third of the global market for car occupant restraint products and that it has a some what higher global market share for airbags than for seat belts. For side airbags, which were invented by Autoliv and introduced in 1994, Autoliv's global market share is still approximately 50%. Also for other recent safety improvements, such as seat belt pretentioners, load limiters and airbag curtains, Autoliv's global market position is strong.
(Source: www.autoliv.com)
Customers for Autoliv
Autoliv's first customers were Autoliv GB, an A-class company in Chichester. After a short period of time they gained 100 % shares of the business. Now this plant supplies springs to all 4 factories in the U.K, Ellesmere Port, Portsmouth, Dagnem and Southampton. In the global market Autoliv has many customers in many different areas of the
world:
In Germany Autoliv made two plants, one in Hamburg which supplied Mercedes and one in Munich which supplied the parts to BMW. Both were A-Class companies. When these factories were first set, they had quality problems. Mercedes rejected the springs because of too much noise cause by the spring in the A-class models. This was because they were placed near the ear. To overcome this problem Autoliv made the spring with a 'bush' in it to reduce noise, thus this was a higher spec then with any springs e.g. In the E-class they give the standard model, which
is a universal part that could fit in both left hand and right hand cars.
Now Autoliv have 100% of the shares.
In Sweden Autoliv made a showcase factory next door to Volvo, who they supplied the parts to. Here they also faced quality problems but overcame them and now they own 100% share of the A-Class business.
Autoliv then thought of setting a plant in France. France has got one of the strictest testing / quality. This was a major problem Autoliv had to undertake. If Autoliv pass this test then they could set up a plant anywhere in the world.
Another country was Estonia. Estonia was similar to Spain, Autoliv could not compete in cost and there was a big risk in the firm not doing well here.
The solution to this was that Autoliv had a joint venture with a Scottish subcontractor to build a C-Class company; they moved the plant and equipment to Estonia. This intermediary proved useful because they were -already in Estonia and also can share the costs. This provided Autoliv with minimal risk and they shared the costs and profits. Autoliv then supplied the springs to the Swedish A-class company from the Estonian C-Class company.
There was a similar problem in Thailand. Autoliv could not the risk in moving a C-Class company to Thailand because of the costs involved. The A-Class company said the products were too expensive so the C-Class company did a joint venture with the A-Class company that was already there. The C-Class company rented space in the A-Class factory because of the low costs there. To do this a personnel from Autoliv in Milton Keynes went to Thailand and co-coordinated the move. Now the A-class company there supplies the springs to OEM such as Daewoo and Mazda.
The last company Autoliv put a Factory on was Australia. Again Autoliv encountered problems, this time with the OEM, Toyota. Toyota rejected the plastic casing in which the springs are embedded because of cracking in the plastic cause by heat. Autoliv then had to make the casing with a special plastic that could resist the heat for the Australian OEMs.
As you can see from the above an important element of Autoliv's strategy has been to establish joint ventures to promote Autoliv's geographical expansion and technological development and to gain assistance in marketing Autoliv's full product line to local automobile manufacturers. Total sales of Autoliv's joint venture operations to outside customers aggregated approximately $ 338 million in 2001. These joint venture operations are accounted for according to the equity method.
(Figures from Autoliv website)
A description of how products are adapted to meet the needs of other countries (Parts Approval Production Process) PAPP Autoliv's product is a universal product which means that it could fit into both left handed and right handed cars. It could also rotate clockwise and anti-clockwise. Product quality is paramount because this product is at the heart of automotive safety.
To receive an order they have to go through the PAPP which could take up to 3 months. PAPP looks at elements such as quality, delivery and check if they can satisfy customers.
French Technical Centre
Turkey put a business plan forward to the French Technical Centre, which approved the business plan. They then held a meeting in Turkey and soon discovered it was not going to be as easy to set up a business because of red tape, bureaucracy (They didn't understand dhow the government works). They then had to find intermediaries to help them. They employed a consultant and did a joint venture with an A-Class company.
The consultant helped them out by finding them factories, legal aid and how the government system works, e.g. grants to set up the business.
A description of the use of intermediaries and give an explanation of each and how these have been used by Autoliv in achieving their export strategy.
The Paliwoda Table
WELCOMING INVESTMENT CLIMATE
HIGH MEDIUM LOW
HIGH
COST
OF MEDIUM
ENTRY
LOW
Source: Paliwoda. 1986. Pg. 68.
Exporting
Exporting is low cost and low risk which means that a company will save money and prevent any loss in money.
Management contract
Management contract is people who work together and act on your behalf in another country.
Sales subsidiary
Sales subsidiary is where people work promoting your company.
Know-How contract
Workers work on a project using another country's resources.
Industrial co-operation
This is when two business work together to build better market share in the market.
Joint Equity Venture
This occurs when two businesses try to get into market help each other to attack a market.
Franchising
Franchising is when you set up a franchise following a companies terms and condition. E.g. McDonalds get people to run a franchise in different countries where they get a fair share of revenue that is made whilst the franchise abides by terms of McDonalds contract.
Assembly
Assembly is when you set up factories in another country to start manufacture products.
Wholly Owned JV
This is when you wholly own a satellite plant in a country.
Applying Paliwoda with Autoliv
Exporting
With regards to Autoliv's strategy. For 5 - 10 years Autoliv were casual exporters, exporting their products from the U.K. Soon they gained 100% of the U.K market and saturated it. They then had to change their strategy to take a more global approach. They started exporting to France, Germany and Sweden.
Industrial co-operation
In Spain they realised they couldn't compete with the price their because of low cost labour in Spain. Estonia was similar to Spain, Autoliv could not compete in cost and there was a big risk in the firm not doing well here. The solution to this was that Autoliv had a joint venture with a Scottish subcontractor to build a C-Class company.
Assembly
There was a similar problem in Thailand. Autoliv could not the risk in moving a C-Class company to Thailand because of the costs involved. The A-Class company said the products were too expensive so the C-Class company did a joint venture with the A-Class company that was already there. The C-Class company rented space in the A-Class factory because of the low costs there. To do this a personnel from Autoliv in Milton Keynes went to Thailand and co-coordinated the move.
Wholly owned JV & Know-how contract
Autoliv then wanted to place a plant in Turkey but soon discovered it was not going to be as easy to set up a business because of red tape, bureaucracy (They didn't understand dhow the government works). They then had to find intermediaries to help them. They employed a consultant (Know-how contract) and did a joint venture with an A-Class company (Joint equity). The consultant helped them out by finding them factories, legal aid and how the government system works, e.g. grants to set up the business.
A classification of whether the business is at a casual, active, full or global stage of international trading.
Casual Trading
Casual Trading means selling goods by retail at a place (including a public road) to which the public have access as of right or at any other place that is a casual trading area.
Active Trading
This is when a company is trading and developing in other countries.
Global stage of international trading
This is when a company is at its peak and has succeeded in global trading all around the world. An example of this is The Coca Cola Company.