The article Aston Martin to Shed up to 500 Jobs in Cost Cutting Drive states that the company, Aston Martin, is to retrench some of the workers in the next few months since it is experiencing a reduction in the sale of its cars. The company’s shares have been drastically dropping since October 2018. It has the objective to restructure such that it can reduce the costs incurred in production. Further, it aims at producing sports utility vehicles (SUVs) as a diversity from its initial line of vehicles. The aim is to attract more women customers. The company is not only reducing the costs in labor, but also focusing on reducing costs contractors and marketers. The aim is to save about $47.6 million, while the restructuring itself is to cost 12 million pounds (Davey). The company’s shares are currently ranging around 68.9 pence.
The problem in the article is the inappropriate strategic positioning of the company. It has not been sensitive to the needs of the customers, and it is until now that it is realizing that a focus on the female segment can be of significance to its sales increase. There are differing interests in the genders regarding vehicles, and the company has been hesitant to concentrate on the female segment that has a significant portion.
It is observed that the issue is further intensified by the current pandemic of coronavirus. The occurrence has led to a decrease in the spending among the people as a result of decreased economic activities that lead to reduced household income. Accordingly, the spending power has drastically reduced. As it is shown in the graph below, the consumer spending rate is positively correlated to the disposable income gained. Consumers are more concentrating on the basic needs, rather than the luxurious vehicles that the company produces. Therefore, while industries like food and clothing are not as much affected, the luxurious goods are observing a reduction in the sales they have been making. The company has not been observant on supply and demand forces for its vehicles.
Another observation is that the company has not been observant on the trends that the competitors make. There are other companies that are not as affected as Aston Martin. They have concentrated on lowly cost vehicles that are still affordable to the people. In addition, they have invested in other equipment that can be integrated in the production processes they have incorporated. Accordingly, a reduction in the sales of the vehicles does not translate to a high reduction in their overall revenue.
One of the recommendations for the company is that it can offer its employees a temporary leave instead of retrenching them. As a result, the company will save the much costs that it is bound to face in the case that it lays them off. Retrenching would mean incurring compensation costs for the next few months. In addition, the company will have to face labor unions in the process. It can strain the company’s liquidity, given that the company is not achieving the expected revenues. Further, the process of retrenchment can be stretched for various financial years, rather than having the 500 employees leaving in the next few months. It would mean a more streamlined financial structure for the company.
Another recommendation would be that the company can diversify. The company has been concentrating on luxurious cars for the 107 years in which it has been existing. However, there could be other models that are affordable that can increase the company’s sales. The line of production could be easily accommodated in the company’s production process. Accordingly, the company can still be making revenues even with the issue of universally reducing spending.
It can also be recommended that the company intensifies its marketing skills by concentrating on the marketing mix. The company has put less effort on the marketing strategy due to the realization of reduced revenues. However, the company can significantly gain from aggressive marketing. There are options that the company can have. For instance, it can offer incentives such as discounts for customers. In addition, it can offer the referred customers with a reduced cost as a way of encouraging peer marketing, which is less risky and cost effective than forms of marketing like using mass media. Another easy way of marketing is by capitalizing on the internet. Given that it is now widespread, the company can reach a quite large market.
The company can open regional plants for production of its vehicles. The cost of the cars in foreign markets highly increase due to the shipping costs. However, the company can start assembly plants, so that it manufactures close to the market. There are other attached advantages, such as having the countries in which they open the branches being supportive due to the effect the company can have on the unemployment rates. In addition, the company can gain by achieving lower labor costs in regions that have a low wage rate. Therefore, while the company is observing a downward trend, it can still maintain and increase its revenue.
Works Cited
Davey, James. “Aston Martin to shed up to 500 jobs in cost cutting drive.” (2020). Reuters.com https://www.reuters.com/article/us-aston-martin-redundancies/aston-martin-to-shed-up-to-500-jobs-in-bid-to-cut-costs-idUSKBN23B0PU
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