Industry Structure
Over the past 140 years, the top producing manufacturers have operated throughout the global competitive marketplace. The acceleration that has occurred since the early 1990’s due to the construction from overseas sites and the future establishment of merging multi-national automakers in history development. However, the global markets of automobiles have been broken into three major factors such as: (1) global market dynamics; (2) establishment of global alliances and (3) industry consolidations. At this time, the manufacturing industry for automobiles has established a high level of capital and labor demands. In North America, the historic labor and market has grown to become part of the Big Three, which is known as: General Motors, Chrysler and Ford Motor Company. Also, there are two foreign manufacturers that have become well established and they are: Toyota and Honda.
Example Auto Industry Structural Chart
Future Outlook
According to research, the top ranking sellers within the automotive industry will shift and the market would look totally different by the year 2019. New technology adjustments will take place and emission regulations and fuel-economy forces will change as well. Also, top producing companies will emerge into one business platform while strategizing for the near future to come. China will prevail and continue building its large volume topping India and other foreign and domestic markets. Overall, the sales growth will slow down its profits from a double digit to a single digit annual percentage.
Porter's Five Forces Strategy Analysis as it applies to the Auto Industry
Bargaining Power of Buyers
The bargaining power of makers within the automobile industry has been faced with unchallenging and unlimited potential buyers since the beginning of times. American consumers over time became annoyed with the everyday style of automobiles and wanted a significant change. Foreign and domestic cars were the way of life for these consumers but their preferences were set upon lower prices for their purchases.
Bargaining Power of Suppliers
The regional market has shifted its power of suppliers toward the regression of technology as it has progressed over the past few years triggering new standards and patterns of structural changes within the automotive industry. A large number of investments had placed pressure upon the lower level of probability functions creating a risk through the use of liquidity concerns and bankruptcy. The strategic positioning over the next couple of years is expected to grow and eliminate those previous challenging errors creating new dynamics and growth opportunities.
To properly illustrate externalities that may shift the supply and demand curve in the U.S. auto market over the next five years, it is necessary to look at the recent events having affected the U.S. auto industry during the recession and the strides U.S. auto makers have made to recover from near devast...
The automotive industry is considered elastic. The prices fluctuate depending on supply and demand. For example, when the economy takes a downturn and car sales are down the automakers attach incentives to the purchase of new vehicles to stimulate sales such as interest-free loans, rebates and lowered prices to encourage Americans to purchase their goods. Substitutes are available in the foreign car market. Lower cost, more fuel efficient models are available from many foreign car makers. Policy makers have placed limits on the amount of foreign cars that can be sold in the United States but in recent years the demand is higher so policy makers must respond to that demand. Past statistics tell the story of when fuel prices surge, smaller fuel efficient cars are more in demand. Higher fuel prices cause households to reallocate money from other areas to purchase fuels at higher prices because fuel is needed for transportation to and from work. When fuel p...
Purchasing a car is one of the biggest and most important decisions that someone will make during their lifetime. Over the past several years, the prices of a vehicle have increased significantly due to the rise of inflation. Economists compare averages of vehicles to calculate and determine the cost of every vehicle that ends up on the car lot. To determine the cost they interpret all the above information and include everything from the cost of making the vehicle to the time of selling it. In the long run, the demand for vehicles is inelastic because they become a necessity for many people. However, in the short run, the demand is elastic because the purchase of a new vehicle can be put off for a while.
In the United States, modern car manufacturing has been historically dominated by the American companies including Ford Motor Co., Chrysler Group LLC, and General Motors Co. These three companies, known as the Detroit Three, controlled 95% of the market in the 1950’s and the dominance continued until the beginning of the 21st century. In the 1980’s Japanese auto manufacturers entered the United States, a decade later the Germans, and finally in 2000’s the Koreans. By the end of 2009, the Detroit Three only accounted for 45% of the total U.S. auto market. Another factor that had influence on this was constant fluctuations in gasoline prices and price sensitive consumers. According to the U.S. Department of Energy, gas prices hit record high averaging $3.07 per gallon in May 2007 and kept climbing up to $4.08 in July 2008. As gas prices kept increasing, consumer buying trends have been changing. In 2006 sales for SUVs, pickup trucks, and vans dropped 16%, while the market for compact cars rose by 3%. Unfortunately, the Detroit Three were not prepared for this since their...
Introduction: Who here has a license? Who else is tired of overpaying for a car when you will likely want another in a couple years? Well, two Chinese car companies (Geely and Chery) are going to try to help out and offer cars that are much cheaper then any car on the market. The problem is finding a spot in the American car market because of prejudice in American and trouble finding backing. Even though there is a lot of skepticism towards Chinese car companies securing a foothold in the American car market, with the right marketing and not rushing into the market, there is a good chance that the Chinese car companies will follow the Japanese car companies and carve a spot in the American market.
According to the article, American automakers have not taken into account the needs of the buyers nor are they consulted. The buyers certainly know what they want and could help the manufacturers achieve the required features of functionality. The
The world of technology is ever changing and advancing. With the automotive industry in play technology is constantly surpassing what is available today with what can be done for tomorrow. Technology and the automotive industry go hand in hand with constant improvement to components of cars. Due to technology advancement there is competition within the car industry, especially between American car companies and European car companies. European car companies provide their buyers with innovative variety and revolutionary luxuries. European car technology is superior to American car technology due to their safety, entertainment, and luxury features.
Consumers were shifting their focus to cheaper, smaller, and more gas efficient Japanese and German imports; there were more than a million imports sold and registered by 1970. These Japanese and German competitors were starting to dominate the small-car segment of the auto industry. American car companies knew they had to respond to keep up with this growing car sector.
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).
Future Outlook The United States automotive industry has a promising future because of its resurgence that aims at strengthening the production and market structures. According to Rubenstein (2012), the adoption of the technologies will transform the production of automobiles to meet the changing needs and attitudes of the consumers. For instance, the industry will adopt the electric car production technologies to counter the rising costs of fuel and preferences of the customers. The big three (General motors, Ford and Chrysler) is set to experience increased competition from the global players, an aspect that makes it imperative for the companies to adjust its strategies to remain relevant in the market.
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 location strategy not only considering path of lowest wages but several other important factors such as high skill workforce and market access. The study by service organization shows 15% of North American firms and 29% of European companies are not manufacturing their product in their home markets [5]. Companies increasingly look at the whole world as their market increasing the flows of goods, capital and information. The automotive manufacturing is most suitable sector for analyzing the global manufacturing strategies....
Spatz, J., & Nennenkamp, P. (2002, January). Globalization of the automotive industry-traditional locations under pressure. Retrieved January 14, 2012, from http://www.uni-kiel.de/ifw/pub/kap/2002/kap1093.pdf
In this part of my answer I am going to highlight what I feel the key features / characteristics of the global automobile industry are. First of all I feel that it is important to mention that the actual automobile market itself is very cost and labour intensive,ie, it requires a large amount of labour and money to produce it's products, this is why it is an extremely hard market to penetrate. Examples of where these high intensive elements come from are the following:
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