Worldwide Motor Vehicle Industry

Case Study - Worldwide Motor Vehicle Industry Name Student ID Class day & time Tutor’s name Introduction The automotive industry is responsible for the design, development, assembly, manufacture, and the sale of automobiles. Michael Porter 5 forces model focuses on a company's competitiveness and change in any of these forces influences change in strategy (Hanson et al., 2013). This is an external environmental analysis inclusive focusing on the Five Forces and imports of motor vehicles in Australia rather than manufacturing. Background on the automotive industry The automotive industry has changed over the years, from the end of the nineteenth century, and caters to different consumer needs, economic conditions and new technologies in the automotive industry. The oil crisis of the 1970s and 1980s increased the demand for fuel efficient cars. The automotive industry began in Europe in the 19th century, but it is mass production in the US and demand for automobiles, which propelled the US automotive industry. The steam powered vehicles were few, but the creation of the gasoline engine in the 1860s in Europe changed the industry as gasoline powered vehicles became popular (Miller-Wilson, n.d.). Mass productions techniques were invented in the US in the early 20th century, with the Ford Company first using these techniques. After WWII, Western Europe and Japan became major car manufacturers and exporters. The US automotive industry included many assemblers, but mass production allowed standardization and full-scale production to meet the customers’ needs, while the European industry also improved production. Ford General Motors, Ford Motor Company, and Chrysler Corporation became the biggest auto companies, but there were other independent firms such as Peugeot and Renault in France. During WWII the automotive industry supplied military materials in both the US and Western Europe. Five Forces model The threat of substitute products The substitute products are the alternative products that the customers can buy and there are few alternatives to the automobiles (Hanson et al., 2013). The threat of substitute products is low and the automotive industry has high hosts (Wright, 2017, p. 240). There are no alternative products to vehicles in the global automotive industry, but the sector can choose many different automotive components. The threat of new entrants In the global automotive industry, there is low threat of new entrants, and competitors would require huge investments in good manufacturing hubs. New entrants seek to increase their market share in place of the existing firms and they increase competition (Stringham, Miller & Clark, 2015). Japanese and German automotive companies have established manufacturing facilities in the US, China’s auto industry is growing and there is government support for the industry Competitive rivalry among existing players The intensity of competition is high, where most US car manufacturers sell in the home market, but some of the international auto firms that sell in the US and have established manufacturing facilities. A low-cost position compared to the rivals enhances competitiveness (Hanson et al., 2017). Bargaining power of buyers The bargaining power of buyers is moderately high in the global automotive industry. The exchange between buyers and sellers adds value and powerful buyers (customers) influence price reduction (Hanson et al., 2017). When buyers have greater purchasing power, a company's ability to capture the value created and profits decreases. The bargaining power of suppliers The bargaining power of suppliers in the worldwide auto industry is low. Companies require inputs including labor, raw materials and services, and the cost of these inputs affects the profitability levels (Hanson et al., 2017). The vehicle manufacturing industry players are in a more powerful position to negotiate with the suppliers and influence the price of inputs (Soo, Compston and Doolan, 2016). Political, economic, social and technological analysis Favorable government policies and a good business environment where there is support for R & D improves the worldwide new car motor vehicle industry. In the case of Australia, unionization partly influenced the slowdown of the automotive industry as there were high costs and the industry became less competitive (Taylor, 2013). The economic environment affects the demand for vehicles and the people’s purchasing power. This includes the inflation rate, the tax burden, savings, investments, budgetary allocations and the GDP (Hanson et al., 2013). The socio-cultural environment affects people’s attitudes towards products and their purchasing patterns. There has been growing interest in reducing emissions while the demand for electric and hybrid car models is rising in the West. Technology advances and innovations in the production processes have improved efficiency and the quality of vehicles and there are now self driving vehicles. Car manufacturers prefer to import rather than manufacture Automotive manufacturing investment and production in Australia has declined as the marked performance started declining with Ford, GM Holden and Toyota among the last to close operations (Clibborn, Lansbury, and Wright, 2016). The value of car imports making it untenable to continue operating car manufacturing plants. This was a time when protectionist policies that had been in place since the 1970s were abandoned. This was...