The British car manufacturer, Jaguar plc, has experienced a turnaround in profitability over the past four years. As a result of this recent success, the British Government has decided to return the company to the private sector through a public offering of the stock. Through an analysis of Jaguar’s profits over the past four years, it is apparent that the majority of their success can be attributed to the appreciation of the US Dollar. Like any multinational company, Jaguar plc, is exposed to exchange rate risk, and thus it is necessary to acknowledge this risk and appropriately hedge against it. Taking this into account, Jaguar must make strategic and calculated decisions to ensure that the company becomes more resilient to interest rate swings through growing it profits organically.

Jaguar needs to mitigate its risk by implementing the proper hedge. We determined that a 50% forward hedge would be appropriate given the exchange rate in place. By using the historical data given, we were able to make forecast predictions for an income statement over a stretch of three years.

The rolling hedge will provide a three-year time frame that will allot Jaguar sufficient time to implement its new company wide initiatives that are aimed at driving down costs. The first initiative is the implementation of lean techniques. This initiative will focus on increasing productivity through the identification and elimination of waste. Specifically, by decreasing the amount of inventory on hand along with the application of a push pull supply chain, Jaguar will be able to produce a high level of throughput with substantially less warehousing costs. Furthermore, this initiative would also include a dynamic parts supplier strategy. Historically Jaguar has exclusively purchased its parts from domestic suppliers. The new initiative will call for a global parts policy, inviting all creditable suppliers to submit competing bids for short-term parts contracts.

The focus of the second initiative is to increase annual research and development spending. Jaguar has had a reputation for outstanding design but poor quality, and it is imperative that the company strive to change this perception. A solution for this problem is to increase the size of the engineering department. With more money invested in R&D and a lager engineering staff, Jaguar will see an increase in the overall quality of their vehicles along with a decrease in variable cost. For instance, R&D programs that focus specifically on assembly line efficiency will increase automation, thus increasing productivity.

The third initiative aims to strategically position the Jaguar brand through marketing techniques. Since the XJ-S sport coupe line is debuting in 1984, we plan on increasing customer awareness by promoting the line through heavy amounts of gorilla advertising. This will be done by having the line appear throughout pop culture, through an array of movie and television deals that captures not only the high class stigma Jaguars vehicles carry, but also the speed and tenacity that lies under the hood. The United States is the largest market for luxury cars, with a public that is immersed in pop culture. By using celebrities and idols as communicators of what the Jaguar brand is about (in culmination with the revamped R&D budget and expanded engineering department), we believe we can increase our current market share of 17%.