CASE: MATRA AUTOMOBILE

Corporate Strategy – B14

Name Roll Number

Pallavi Waghmare 08927814

Prasenjit Debdas 08927855

Joytsona Hansda 08927884

2 MATRA MODELS

3

BACKGROUND

REASONS BEHIND SUCCESS OF ESPACE IN

THE 1990s

REANAULT-MATRA ALLIANCE

PROSPECTS OF SUCCESS FOR AVANTIME

AND m72

STRATEGY TO MATRA FOR THE FUTURE

AGENDA

4 BACKGROUND

Started in 1964

Matra was to cover both motor racing and

passenger cars.

Involved in motor racing for 10 yrs, then withdrawl

Success- Le Mans, Formula 1

Passenger car business was less succesful

Matra decided to launch a totally original vehicle –

single body family car- Espace.

5 MATRA MODELS

1965 Matra 530- unreliable quality , bad after sales service

1973 Matra – Simca Bagheera- underpowerd unable to convince its target

1977 Matra – Simca Rancho

1978- Peugeot Citroen took over Chrysler France

Simca cars were renamed as “Talbot”.

1980 Talbot-Matra Murena-total failure

6 CONTD.

1984- Espace 1

1991- Espace 2

1996- Espace 3

2001- Avantime

2002- M 72

7

MATRA RENAULT ALLIANCE

Matra- manufacturing car‟s body and final

assembly

Renault- distibutor, supply car‟s platform,

mechanical components to Matra

The product‟s techinal modifications were to be

decided by Matra.

Actual sales were compared with contractual

volumes on a yearly basis.

1984-2002: Espace 1, 2,3

Initial contract ..56,000 units – 5 years

8

EUROPEAN MARKET FOR

MINIVANS

30% Users were women

65% were young people(35-49)

62% had university degrees

Large families(4.4 persons per household

on avg) were main purchasers.

75% of Espaces sold- 7 seaters, 25%- 5

seaters

SUCCESS OF ESPACE IN THE 1990S

COMPETITIVE ADVANTAGE

Matra Renault

Design &

development

Design experiences in racing

Low cost and short term

development

Production

SMC production technology

Utilization of outsourced

components

Various mechanical

components

Sales and

After sales

Brand

Dealers and service centers

in Europe

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SUCCESS OF ESPACE IN

1990S

MPV

• Created a new Vehicle category-MPV (Multipurpose Vehicle Segment)

Design

• Modular Internal Layout

• Limited length

• Flat Floor

• Raised Platform for Driver‟s seat

Image• Untraditional

• Catered to demand for modular, comfortable, compact cars.

Alliance•Renault provided strong marketing support•Positioned it as top-of-the range vehicle.

12 CONTD….

Differentiation

•Designed to carry up to seven passengers while having the same size chassis as an average sedan car

Cost Structure

•Low volume production at competitive cost, through SMC technology

Technological

Competency

•Technological advanced design compared to competitors

Customer Loyalty

• Renewal Rates- 80% in 1990 and 70% in 1994

HOW DID ESPACE’S PROFITABILITY

EVOLVE OVER TIME

14 MARKET SHARE IN EUROPE

Number of Monospace Minivans registered annually in Europe (Appendix-2)

15ESPACE-I (1984-1991)

•Repositioning by Renault as „Top-of-the-range‟ article

•1985 – 70 units/day

•1986 – 100 units/day

•Record profitability rate

Contract

revision

Profit

11.5%

16 ESPACE-II (1991-96)

• New Market Segment – „Monospace Minivans‟

• 1992 – Net Earning - € 76 m

• 1993-94 – Profitability of 9%

Year Sales

(€ mn)

Net Earnings

(€ mn)

1993 806 73

1994 898 77

1995 796 53

Appendix -8 , Lagardere Automobile

17

ESPACE-III (1996-2002)

•Increase in competitive pressure•Despite Fierce competition, Renault sold 350,000 units between 1996-2002

•Matra AutoYear Sales

(€ mn)

Net Earnings

(€ mn)

1997 1070 34

1998 1123 37

1999 1143 42

2000 1183 50

2001 1141 33

Appendix -8 , Lagardere Automobile

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ESPACE-III (1996-2002)• RENAULT Year Sales

(€ mn)

Net Earnings

(€ mn)

1997 25274 300

1998 29739 1307

1999 29738 768

2000 31486 NA

2001 33841 NA

Appendix -9 , Renault Passenger Cars

ESPACE-IV (2002-)

• Annual sale target of 100,000 units

RENEWAL AND FINAL WITHDRAWAL

FROM ALLIANCE BY RENAULT

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PORTER’S FIVE FORCE

ANALYSIS

Competitors

Substitutes

Customers

New Entrants

Suppliers

Supplier-Long term contracts.- Huge quantity orders and at fixed contract prices

SubstitutesMinitrucksSedans

Competitors• Very low competition for initial 10 years,Chrysler Voyager was the only one in 1988.•1994 PSA and FIAT –Peugeot 806,Citreon Evasion,Fiat Ulysse,Lancia Zeta.•1996 Scenic from Renault.

CustomersLoyal customers to Espace, high renewal rates 80% in 1990 & 70% in 1994Less bargaining power

Barriers for New Entrants•Technical Knowhow – design •High investments

21

RENEWAL OF MATRA-

RENAULT ALLIANCE

Renault Sold American Motors to Chrysler in 1987

Failure to gain control in United States Automobile market

High Entry ticket for large lot manufacturing of Espace

Daily output of 1,000 units would have cost €1 bn.

Renegotiation of alliance with Matra by Renault for Espace 2 covering 120,000 units over 1991-1995

22 CONTD….

RENEGOTIATION OF MATRA-RENAULT ALLIANCE FOR ESPACE 3 IN MAY1993 FOR 330,000 UNITS OVER 1997-2001

Exogenous Factors

Attempt to find successor to Espace-II

Prospect for alliance renewal based on competitor‟s project details

Battle between Renault‟s Project J66 and Matra‟s P52 ,won by Matra‟s P 52

•Renault-Volvo Merger Failure•Renault’s decision to launch J64 project resulting in reduced commercial potential of J-66

23

WITHDRAWAL FROM

ALLIANCE (ESPACE-IV)

Renault-Demand of daily output 600 units of Espace-IV

at € 2,300 less price using sheet metal production

Counter-offer by Matra of daily production 400-450 units using

SMC Technology because

Romorantin plant would no longer be competitive

Fear of losing out to sheet metal production by Renault

Refusal of offer by Renault-WITHDRAWAL from alliance

Espace 4 –steel body and 100% made at Renault’s Sandouville’s plant

PROSPECTS OF SUCCESS FOR

AVANTIME AND M72

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Prospects of SuccessAventime

- Innovative design of „Coupspace‟- attracted hi-tech product loving young population

- Preferred by adventure loving consumers

- leverage upon loyal Espace buyers

- Mutipurpose vehicle

m72-Could be used by family members to meet their personal needs

-Streamlined appearance –thus leading to low production costs.

-Liberalization of Automobile trade in Europe

-A new innovative product aimed at a new market– a minimal car for around € 6000

-Matra‟s innovation: Direct contact with end users and garages throughout Europe leading to reduction in distribution costs.

- Dealers got a commission of 6% whereas traditional automakers usually gave their dealers around 15% on the pre-tax retail price.

STRATEGY TO MATRA FOR THE

FUTURE

27

CREATING STRATEGY FOR

MATRA AUTOMOBILES

Problems Faced by Matra

Loss of its Espace brand; conceded to Renault due to severity in their relationship

Potential Competition for Avantime & M72 cars from big car makers including Renault

Reluctance of big Car makers to entrust Matra with advanced projects because of production tools used which are too „Craftsman-like‟

Change in automobile production policies „Platforms & Modules‟ reduces subcontracting of assembly operations

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STRATEGIC ALTERNATIVES

AVAILABLE

Creator of Concepts

Manufacturer of Automobiles

Developer working on cars manufactured

by others

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STRATEGY-FOCUSED

DIFFERENTIATION

• Matra should focus on narrow market niche where buyer needs & preferences are distinctively different.

• Aim at developing core competency (SMC technology) i.e. concept creation & manufacturing rather than providing service in whole value chain.

Strategic Target

• Attributes that appeal specifically to niche members

Basis of competitive advantage

• Communicate how product offering does the best job of meeting niche buyers expectation.

• Choose a suitable partner (big car makers like FIAT, Chrysler) to gain access into International Market.

Marketing Emphasis

30 CONT..

• Products that match the taste and requirement of niche members.

• For higher market share (higher production level), need to move to sheet metal mfg because of high variable cost in SMC.

Production emphasis

• Start a new collaboration with other manufacturers

• Matra strength (core competency) lies in their design and engineering

• Should use this strength to start automobile engineering services

• Improve their branding and marketing

• Increase their production capacity to realize economies of scale at higher production levels

• Invest to start a new plant for metallic frames

• Improve their distribution and after sales service

Factors to sustaining strategy

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WHAT HAPPENED TO MATRA

AFTERWARDS?

Matra automobiles closed in April 2003 owing to bad sale of Avantime

brand

After 40 years of creating innovative cars, Matra Automobile's factory at

Romorantin in central France closed

Matra's design and engineering section was sold to Italian design

and coachbuilding specialist Pininfarina

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