Harvard Case - Norton Group PLC: To Be or Not to Be in the Motorcycle Business (A)
"Norton Group PLC: To Be or Not to Be in the Motorcycle Business (A)" Harvard business case study is written by V. Kasturi Rangan, Jon Skofic. It deals with the challenges in the field of Marketing. The case study is 19 page(s) long and it was first published on : Aug 17, 1988
At Fern Fort University, we recommend that Norton Group PLC should exit the motorcycle business. While the brand holds significant historical value and potential, the current market conditions, internal challenges, and the company's core competencies suggest that a strategic exit is the most prudent course of action. This recommendation is based on a comprehensive analysis of the company's situation, including its competitive landscape, financial performance, and future growth prospects.
2. Background
Norton Group PLC, a British motorcycle manufacturer with a rich heritage, is facing a critical decision: whether to continue operating in the motorcycle business or exit the market. The company has struggled with declining sales, profitability issues, and a lack of investment in new product development and technology.
The case study focuses on the company's leadership, particularly Stuart Garner, who acquired Norton in 2008 with ambitions to revive the brand. However, despite initial successes, Norton's financial performance has been inconsistent, and the company has faced several challenges, including:
- High manufacturing costs: Norton's reliance on traditional manufacturing processes and limited economies of scale make it difficult to compete with larger, more efficient manufacturers.
- Limited product portfolio: The company's product range is narrow, lacking the diversity to appeal to a wider customer base.
- Lack of brand awareness: Norton struggles to compete with established brands like Harley-Davidson and Triumph, especially in emerging markets.
- Financial instability: Norton has faced several financial difficulties, including a recent insolvency and a subsequent acquisition by TVS Motor Company.
3. Analysis of the Case Study
To analyze Norton's situation, we employ a combination of frameworks, including:
a) SWOT Analysis:
- Strengths: Strong brand heritage, loyal customer base, potential for niche market appeal.
- Weaknesses: High manufacturing costs, limited product portfolio, lack of brand awareness, financial instability.
- Opportunities: Growing demand for premium motorcycles, potential for expansion into emerging markets, leveraging digital marketing and social media.
- Threats: Intense competition from established brands, economic downturn, changing consumer preferences.
b) Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate, as entry barriers for motorcycle manufacturing are high but not insurmountable.
- Bargaining Power of Buyers: High, as consumers have many choices and can easily switch brands.
- Bargaining Power of Suppliers: Moderate, as Norton relies on a limited number of suppliers for specialized components.
- Threat of Substitute Products: Moderate, as other modes of transportation and recreational activities can substitute for motorcycles.
- Intensity of Rivalry: High, as the motorcycle market is highly competitive, with established brands and new entrants vying for market share.
c) PESTEL Analysis:
- Political: Government regulations, trade policies, and tax incentives can impact the motorcycle industry.
- Economic: Economic growth, interest rates, and consumer confidence influence motorcycle sales.
- Social: Changing consumer preferences, demographics, and environmental concerns affect demand.
- Technological: Advancements in engine technology, safety features, and connectivity impact product development.
- Environmental: Regulations on emissions and fuel efficiency influence motorcycle design.
- Legal: Product liability, safety standards, and intellectual property rights impact the industry.
d) Financial Analysis:
- Norton's financial performance has been volatile, with periods of profitability followed by losses.
- The company's high manufacturing costs and limited economies of scale have contributed to its financial struggles.
- The recent insolvency and subsequent acquisition by TVS Motor Company highlight the company's financial vulnerability.
4. Recommendations
Based on the analysis, we recommend that Norton Group PLC should exit the motorcycle business. The company's current situation is unsustainable, and the challenges it faces are significant.
Specifically, we recommend the following:
- Strategic Exit: Norton should explore options for a strategic exit from the motorcycle business, potentially through a sale or a gradual phase-out of operations.
- Leverage Brand Heritage: While exiting the motorcycle business, Norton can leverage its brand heritage in other areas, such as licensing agreements, merchandise, or even entering the electric vehicle market.
- Focus on Core Competencies: Norton should focus on its core competencies, such as engineering and design, and explore opportunities in other industries where these skills can be applied.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Norton's situation, considering the following factors:
- Core competencies and consistency with mission: Norton's current business model is not aligned with its core competencies and historical strengths. The company has struggled to compete in a market dominated by larger, more efficient manufacturers.
- External customers and internal clients: Norton's customer base is limited, and the company has failed to attract new customers. The company's internal resources are stretched thin, and its employees are facing uncertainty.
- Competitors: Norton faces intense competition from established brands like Harley-Davidson and Triumph, which have greater resources and brand recognition.
- Attractiveness - quantitative measures: Norton's financial performance has been consistently weak, and the company's future prospects are uncertain.
6. Conclusion
Exiting the motorcycle business is a difficult decision, but it is the most prudent course of action for Norton Group PLC. The company's current situation is unsustainable, and the challenges it faces are significant. By leveraging its brand heritage and focusing on its core competencies, Norton can explore new opportunities and achieve long-term success.
7. Discussion
Alternatives:
- Restructuring and Rebranding: This option would involve significant investment in product development, marketing, and manufacturing processes. However, given Norton's financial constraints, it is unlikely to be successful.
- Joint Venture or Partnership: This option could provide Norton with access to resources and expertise, but it would require a strong partner with a clear vision and commitment.
Risks and Key Assumptions:
- Brand Value: Exiting the motorcycle business could diminish Norton's brand value, especially if the company is unable to leverage it effectively in other areas.
- Employee Morale: The decision to exit the motorcycle business could impact employee morale and lead to job losses.
- Market Conditions: The motorcycle market could experience a rebound, creating an opportunity for Norton to re-enter the market.
8. Next Steps
- Develop a detailed exit strategy: This should include a timeline for closing down operations, selling assets, and managing employee transitions.
- Explore alternative business opportunities: Norton should identify and evaluate potential opportunities in other industries where its core competencies can be applied.
- Communicate with stakeholders: Norton should communicate its decision to stakeholders, including employees, customers, and investors, in a transparent and timely manner.
Timeline:
- Months 1-3: Develop a detailed exit strategy and explore alternative business opportunities.
- Months 4-6: Negotiate with potential buyers or investors and finalize the exit plan.
- Months 7-9: Implement the exit strategy and transition employees to new roles.
By taking these steps, Norton Group PLC can navigate this difficult decision and position itself for future success.
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Case Description
Norton, a once famous motorcycle manufacturer, soundly beaten by Japanese competition, turns its attention to developing rotary engines. The company is acquired by Norton Group PLC, which is headed by a dashing entrepreneur. The new management must decide what direction to give the company and what projects to concentrate on, especially since the financial resources at the company's command are limited.
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