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Robert answered on Dec 22 2021
Introduction
The McLaren Group was created by Ron Denis and is based at the McLaren Technology
Centre in Woking, Surrey, England. Originally, the group was formed by Bruce McLaren
from New Zealand in 1963 and it focused upon Vodafone McLaren Mercedes Formula One
Racing Team. The company has adopted aggressive business strategies to increase their
portfolio by diversification (Spurgeon, 2000).
Overcoming Entry Barriers
McLaren has entered in car manufacturing to offer their cars to mass market. However, their
cars are not for the mass as they are highly priced and the mass cannot afford to buy them.
Their cars are status symbol for upper class and they do not compete with the players in the
mass market. Their target customers do not consider upon purchasing affordable cars from
GM, Ford, VW etc., but exotic, custom street legal race cars. Their competitors are the likes
of Ferarri, Lamborghini, Koenigsegg etc. However, the company has all the potential to sell
their cars at premium price and focus upon quality and performance (Spurgeon, 2000).
The new entrants find it very difficult to make their mark in car industry considering
presence of so many big giants. People do not put their trust in a car from the new entrants
and it would take years to build the trust and name to sell their cars. However, McLaren
found it a bit easy in entering the market and building the trust and name. McLaren is an
established and cherished name in car racing. They have been very successful in the car
racing venture and they thought to put their knowledge and experience in building cars for
roads and general public. They launched their first car McLaren F1 to start off their new
venture. The car did not sell good but it placed McLaren in hyper car market (Spurgeon,
2000).
McLaren’s passion and car engineering helped them to cross the first entry barrier.
Car engineering is the first and foremost thing that a car manufacturing requires and it would
take very less time to build the trust in the market. McLaren builds cars paying attention to
every detail and putting as much power as possible so that they can run at amazing speed.
Being a car racing giant, McLaren capitalized upon the customer loyalty despite the
fact that there were already many strong brands. McLaren is an established brand in racing
and it had sufficient capital, equipment, building etc. to start their business. It has equally or
even more efficient production technology and engineering to combat with the car giants.
They had a good network of fans across the globe and there are a huge number of people who
strive for speed. They have always focused greatly on research and development to keep on
perfecting their existing technology. The switching cost of the consumers was not high
compared to the cars in the same segment.
Level of Diversification
The diversification of McLaren is phenomenal. The company was very aggressive when it
came to the diversification their business. Originally a Formula One racing company, they
diversified in car manufacturing, healthcare, construction, and software. Their success in
Formula One is extended to these diversified areas of business. The success of the company
cannot be just given to their success factor in Formula One but also their strategic planning
and thinking that led them to the success (Marlin, 2004).
McLaren showed a high level of diversification as it entered different segments of
business which they have no expertise of when they started. When they entered the car
manufacturing business, it was somewhat a related field and they had expertise in
manufacturing technology and they had fans across the globe. The level of diversification
was moderate in this case. They were well versed with the car engineering and they had
developed a...