Australia is best known for the production of large vehicles and is one of the most open automotive markets in the world. The industry plays a vital role in employment, exports, and innovation in the economy of Australia. It is a self-contained ‘full-service’ industry that operates the full range of activities from design to manufacture of vehicles even though the industry is small by global standards (Singh, Smith, & Sohal, 2004). The three major companies that dominate the industry in Australia are the Toyota Motor Corporation Australia, Ford Motor Company of Australia, and GM Holden. However, over the recent years, the industry has undergone major structural reforms and these reforms have mainly focused on the removal of quotas and the lowering of protection which led to some rationalisation of the industry, made imports more accessible to consumers, and thus made the industry more internationally competitive (Review of Australia’s, 2008). As a result, Australian automotive industry suffered as a wave of manufacturers comprising Ford, Holden, and most recently Toyota have ceased their operations in the country.
Comparative advantage is defined as the ability of a business entity, in this case, a country to specialise in those products that it can produce relatively more efficiently than other countries (Krugman & Obstfeld, 2003, as cited in Smit, 2010). Hence, it is the comparative advantage which will conclude whether it is beneficial to produce a product or rather just import it (Jaravaza, Mzumara, & Nyengerai, 2013). With the intense competition in the global market, the comparative advantage of a country’s exports is the primary influence on that country’s export volume (Chunming & Wei, 2012). Australia does not have a co...
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...nfluencing investment decisions such as broad R&D support, education and training support (Allen Consulting Group [ACG], 2013). However, it is noticed that the government support for the automotive industry has reduced in Australia this recent years and the level of government support and policy certainty is not on the similar scale in Australia as compared in other countries (ACG, 2013). If globally competitive incentives are not provided, there is a more serious risk that the manufacturers will halt production. For example, the recent case whereby Abbott declaring that he will no longer be providing extra government assistance which led to the major manufacturers ceasing production one after another. The government proclaimed that “better governance is not the same as more government” in light of the government pressure to intervene in the industry (Baker, 2014).
This paper will focus on the future of the U.S. Automobile industry as the United States recovers from the worst recession we have experienced in the past 75 years. I will provide information on the following topics pertaining to the U.S. automobile industry:
To reiterate, let’s construct another example of two companies that produce oranges. Company number one is located in Florida where it’s the perfect environment to produce oranges. Company number two however is located in Toronto, which to be fair, isn 't a suitable environment to produce natural oranges, unless of course they’re produced in a green house. Although both companies are able to grow and produce oranges, company number one has the absolute advantage because they use the much cheaper and natural methods, hence the greater demand. This theory can be contradicted with the concept of comparative advantage, which in description means the ability to produce specific goods at a lower opportunity
In many ways, the automotive industry has huge impacts on Canada. The impact it has creates jobs, and services. It also boosts economy and contributes to its success. Over the last two decades, the automotive industry has been a leading contributor to Canada’s economy and is a primary factor as to whether or not the economy will be successful. There are many contributing branches of the sector that allow it to be successful. This is shown through the production and manufacturing of vehicles, as well as the sale of the vehicles. The automotive industry has had a significant impact on Canada’s economy over the last 10 years. If the production and sale of domestic vehicles were to decline, Canada’s economy to be severely crippled and fall back into a recession.
By implementing these strategies the government will have created a stronger, more efficient economy, and the focus on a stronger labour force encourages future economic growth and development for Australia.
Over the past 150 years, Canada’s relationships with other nations has led to the development of many trade sanctions. The nations involved in these trade sanctions haven’t always had the greatest relationship, allowing Canada to become the tie between the nations, advancing the development of countless Canadian industries. Due to Canada’s relatively small population, its automotive industry, hasn’t been able to grow as a self-sustained industry, leading the industry’s development to occur solely through economic sanctions. The two dominant forces these automotive sanctions face are the United States and Europe, each having a large stake in the development of the industry.
The Australian government also encourages the idea of fair competition. To keep the consumer choice less restrictive, the government might not allow certain takeovers that may limit the number of choices available to the consumer. Competitive prices that come from businesses are also good for the economy in general, for example if an Australian owned company, such as Uncle Toby's, can provide the same food as an American owned company at a competitive price, then consumers will tend to buy from the Australian company which keeps more of our money in our country. Basically, the government intervention in economies such as ours, is all done to benefit our economy as a whole, to help even the distribution of income, to provide resources to help satisfy our unending collective wants. It is all done in an effort to make our country's economy as efficient and all round satisfying, as possible.
In our country, the provincial and federal governments intervene in the energy sector, banking sector, and agricultural sector. In most cases when our government intervenes prices tend to go up, quality goes down, and in rare circumstances, companies decide not to go forward with projects because of costly regulations. For example, last week the government decided to approve the contentious natural gas plan on B.C. coast after six years and 192 conditions. As a result, the companies in charge of this project are contemplating whether it is worth it to move forward with this project because of the conditions imposed by the government. Make no mistake Canada is one of the best countries in the world.
One of the main factors that caused globalisation in Australia was a reduction in protection, the act of National trade barriers being removed. A reduction in protection of international trade is done by governments who work together to develop agreements with each other to reduce trade barriers and allow tariffs on imported goods to be reduced. Australian governments have been involved with countries such as Singapore and Malaysia in an effort to help reduce the tariffs and quotas on imported goods, resulting in free trade agreements between other countries. For example, when National trade barriers are removed, opportunities are opened up to Australian business to import goods at a cheaper price and then export other goods to new markets in other countries. Evidence of this was recently reported on the ABC news program, the reporter quoted that ‘our government should not sign any free trade agreements with Japan, until the tariffs on Australian beef and dairy products are reduced.’ This news report showed local Australian farmers who are trying to convince our Prime Minist...
Australia has had one of the most outstanding economies of the world in recent years - competitive, open and vibrant. The nation’s high economic performance stems from effective economic management and ongoing structural reform. Australia has a competitive and dynamic private sector and a skilled, flexible workforce. It also has a comprehensive economic policy framework in place. The economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to businesses. For long time, Australia is a stable democratic country with strong growth, low inflation and low interest rate.(Ning)
Krugman defines comparative advantage as “the view that countries trade to take advantage of their differences” (1987, p. 132). Comparative advantage theories assume constant returns to scale and perfect competition. Krugman writes that trade exists when countries differ from one another in goods they have to offer, technology, or factor endowments. Although there are multiple models explaining the cause of trade, each differs as to what factors are included to explain why trade takes place. Economist Ohlin and authors Burenstam-Linder and Vernon began introducing counter-points to comparative advantage as early as the late 1950’s, saying that formal models of comparative advantage did not take into account all factors affecting international trade. International specialization and trade caused by increasing returns, as well as economies of scale and techn...
Certain regions could also have a higher production rate due to their culture and what their nation encourages economically, which could seem favorable for regions who may not produce it like they do because they cannot or they just don’t have the market to do so in their country. Australia’s has had an influx of imports due to Australia’s free trade agreements with: China, Japan, Korea and Trans-Pacific Partnership countries. The free trade agreements have benefits which include; creating stronger ties with our trading partners, promote regional economic integration and build shared approaches to trade and investment, increase Australia’s productivity and contribute to higher gross domestic product (GDP) growth by allowing domestic businesses access to cheaper inputs, introducing new technologies and fostering competition and innovation and most importantly the elimination of tariffs and behind the border barriers that impede the flow of goods and services between parties which increases cooperation and encourages investment. The influx of
The automotive industry is one of the most important sectors of the economy for every country in the world. It involves a large number of corporations and institutions engaged in the manufacturing process of motor vehicles including designing, developing, manufacturing, marketing, and selling. It contributes to the global economic growth by generating a significant return and creating a ripple effect on supporting the supply chain as well as providing job opportunities for the skilled workers (ACEA, 2016).
Ford’s production plants rely on very high-tech computers and automated assembly. It takes a significant financial investment and time to reconfigure a production plant after a vehicle model is setup for assembly. Ford has made this mistake in the past and surprisingly hasn’t learned the valuable lesson as evidence from the hybrid revolution their missing out on today. Between 1927 and 1928, Ford set in motion their “1928 Plan” of establishing worldwide operations. Unfortunately, the strategic plan didn’t account for economic factors in Europe driving the demand for smaller vehicles. Henry Ford established plants in Europe for the larger North American model A. Their market share in 1929 was 5.7% in England and 7.2% in France (Dassbach, 1988). Economic changes can wreak havoc on a corporation’s bottom line and profitability as well as their brand.
The Law of Comparative Advantage was introduced by David Ricardo in 1817 in his book ‘Principles of Political Economy and Taxation’. According to this classical theory, a comparative advantage exists for a country when it has a margin of superiority in the production of a certain commodity over others. Comparative advantage results from differing endowments in the factors of production like technology, natural endowments, climate, etc. among different countries. Therefore, each country exports the commodities which it can produce at a lower opportunity cost or, in other words, lower marginal cost of production and imports the rest. This would ultimately be beneficial for all countries engaging in free trade as each would gain through its specialization
The automobile industry is a pillar of global economy. Globally automotive contributes roughly 3 % of all GDP output. It historically has contributed 3.0 – 3.5 % to the overall GDP in the US. The share is even higher in the emerging markets, with the rates in china and India at 7 % and rising. China produces the highest number of automobiles followed by US and Japan (oica.net, 2015). The industry supports direct employment of 9 million people to build 60 million vehicles and parts that go into them (oica.net, 2015). Many other industries such as steel, iron, glass, aluminium, textiles etc. are associated with the automotive industry and resulting in more than 50 million jobs owed to the auto