Saab's Demise Almost Complete!

Some major Scandinavian companies like Nokia have been grabbing the headlines for all the wrong reasons lately, but one other Nordic competitor has been quietly slipping away into oblivion. Saab is quickly becoming a case study in everything that can go right and also can go wrong with strategy and marketing. Unrivalled success and prestige, followed by a series of bad decisions that have bankrupted the company. What went wrong and could it have been avoided?

The early days of this company are the good part of the story. Saab was formed after the Second World War out of an aerospace and defence company and produced its first car in 1949. It reached the pinnacle of its success in the late 1970s with the launch of the Saab 900 which went onto be its best-selling model with almost one million units produced. The appeal of Saab can be attributed to the performance of the car as well as to its distinctive design and specifications. In terms of features, Saab cars were unlike any other and it became a brand that consumers aspired to owning.

However, it was not just consumers that coveted the brand but also some other large corporations liked what they saw as well. When General Motors was looking to expand into the premium end of the market in Europe, they took a 50 percent stake in Saab in 1989 and completed full ownership in 2000. But their strategic management of the brand ultimately proved to be disastrous. In a bid to reduce costs, GM imposed design changes and began manufacturing models on shared platforms with other brands. The Saab 9-3 was built on the same basic structure as the Opel Vectra while the sporty 9-2x was so close to the Subaru that it became known as a Saabaru. While these and other decisions may have made sense financially, they certainly didn’t commercially. Saab lost its distinctiveness, its reputation for quality and its appeal. Customers voted with their feet and by the time GM put the company up for sale in 2010, its sales levels had collapsed to just 31,000 units.

Dutch niche car maker Spyker bought Saab in 2010 but failed in its efforts to rescue the brand which slid into bankruptcy in late 2011. Its major assets are now held by a Japanese-Chinese consortium, NEVS, that plans to being producing electric cars by 2014. A couple of smouldering embers in the ashes are worth noting. First there is an estimated 300,000 diehard Saab owners around the world – a customer base that has effectively been ignored for two decades. Second, Saab AB is holding onto the original and distinctive ‘gripen’ logo. Its associations are probably the only unique asset that has been left. And the moral of the story? A strategy that ignores the customer is going nowhere as fast as a turbo engine can go from nought to sixty!

Why Do You Pay For Advice?

So how many people predicted the outcome of yesterday’s enthralling All-Ireland hurling final which ended in the first draw in over 50 years? Yes, probably not too many. And this, despite all manner of analysis, consideration of scenarios and predictions by hurling experts. Trying to predict the future is something that we do all the time. Economists have become celebrities by either telling us that they predicted the global recession or by forecasting how much better or worse it is going to get. And a whole industry has been built around advising you what to do with your money. But two interesting questions arise. How good is this advice and if we believe that it is not all that good, why do we continue to seek it out?

These questions have been the subject of some interesting experimental studies most notably a recent one published by Powdthavee and Riyanto. They asked a group of students to bet on the outcome of five successive random coin tosses. But taped to the desk of each participant were five envelopes predicting the outcome of the successive tosses and students could either pay to see these predictions in advance or see them for free after the coin has been flipped. When an initial prediction turned out to be correct, students were more willing to pay to see the next forecast. This tendency increased after two, three and four successful predictions and furthermore, those who paid in advance for predictions also placed bigger bets on subsequent coin tosses than those who did not.

So psychologically, our instinct is to seek out advice. We often pay handsomely for it – sometimes through the small print and sometimes through the fees charged by experts. Much of the time, this advice is not all that good. For example, research demonstrates that most actively managed investment products rarely beat the market index. The reason we still look for advice is due to a phenomenon called the ‘avoidance of regret’. If you make your own decision you only have yourself to blame but if you took the advice of an expert, the decision is not your fault. So the moral of the story is - spend less time listening to (or paying for!) advisors and pundits. Instead hope for some random good luck and also that Galway get the job done next time!