Allegro Automotive Case Analysis

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The current state of the automotive industry is one of shrinking margins, changing consumer expectations and demands, as well as pressure from the government to increase fuel efficiency. There is increased competition in the American market as foreign companies challenge the “Big Two” automotive manufacturers. Costs have increased while the price for their products has remained stagnant. One way that manufacturers have managed to stay profitable is actively working to decrease costs, by using functional analysis and benchmarking. Functional analysis happens when the performance and the resulting cost of features are examined. Benchmarking uses consumer analysis to determine which features are the most desirable to the consumer. Consumer…show more content…
AA has decided to expand their operations to the United States to be closer to the American luxury car market. Recent tax codes have been passed that benefit alternative fuel car manufacturers. Allegro Automotive uses a differentiation strategy rather than being a price leader in order to sell its cars. They are willing to charge more if by doing so it can include features that will be valued by the consumer. The challenge for AA is to produce a car that is up to their exacting company standards and is appealing enough to luxury car buyers to eschew more familiar luxury car models. The strategic question facing Allegro Automotive is to determine if the designers are choosing the correct features to include in the Correre in order to meet the expectations of buyers while still providing enough profit to support the goals of the…show more content…
According to the value index, two components should not have any design changes made. The amount of cost for each of these components is in good relationship to the amount of consumer importance that is placed on the component. The air conditioning system needs no design changes nor does the “other” category. The design team has done a good job of choosing components for these areas that provide the best value while delivering desirable features. The one area that the value index indicates could support reduced spending is the electrical system. The electrical system only has an importance index of nine but Allegro spends 19% of its costs on that system. The two areas that indicate that Allegro could increase design features are the chassis and the transmission. The transmission has importance index of 10 but only 4% of the costs are allocated to this system. Allegro may want to increase the spending on the design of the transmission. Luxury cars often are distinguished by the performance of their transmission in combination with the engine. The Correre could take advantage of that by investing more money in the transmission to increase its performance. This would attract the attention of luxury car buyers who may have been considering a competing brand. The chassis is another area that should have more design features added to it as indicated by its value index of 1.44. However,

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