The motor car was first established in Europe 128 years ago. Since then a large automotive industry has established with a wide range of car manufacturers, suppliers and aftermarket service. An industry can be defined by Stigler as follows “an industry should embrace the maximum geographical area and the maximum variety of productive activities in which there is strong long-run substitution” (Lipczynski and Wilson et al., 2005).
The roots of the automobile industry can be traced back to Henry Ford who was responsible for the development of the assembly line technique of mass production which allowed middle class America to afford to buy vehicles. However despite its impact Fords competitive ...view middle of the document...
This downward trend affects both automotive and manufacturing in general” (Holweg, 2009, p.34) However the automotive industry accounts for just over 3% of German GDP and 2.5% of total employment in the country. “Germany accounts for a substantial share of the total value-added generated by the automotive industry in the EU” (Ward and Loire, 2008, p. 3) 39% of total employed in the automotive industry is in Germany.
The oil crisis increased demand for more economical cars and this demand was met by Japan imports, threatening US and European manufacturers. Trade barriers were called for but this ‘invasion’ could not be halted. The advancements in the industry with regards fuel and green efficiency is moving at a fast pace. It is estimated that by 2020 “electric vehicles and other “green” cars will represent up to a third of global sales in developed markets” (Russ Heaps, 2013). The move from mechanics to electronics and low tech mobility trends give rise to great opportunities. The growing environmental awareness and concerns, growing fuel prices, regulations and depleting oil reserves will increase the demand for fuel efficient automobiles. Alternative fuels such as natural gas which Asia and Latin America have access to will drive the advancements in natural gas powered vehicles.
It is thought Chinese manufacturers will lead the next wave of import competition. This issue arises because of western manufacturer’s inability to adopt better methods to meet eastern productivity and quality standards. Like stated earlier in Fords example, constant innovation must be happening or competition will pass you out. “Problems we face cannot be solved at the same level of thinking we were at when we created them” - Albert Einstein. Western manufacturers have a single minded strategy of volume but the lesson is scale does not mean survival. At present China and India combined vehicle production of 44% of Western Europe output. However as low-cost regions like china develop, others will then emerge. It is those who adapt to shifts in the market that will thrive as competitive advantage is only temporary. Emerging markets accounted for nearly 60 percent of global automotive profits in 2012. These emerging markets will account for approximately two-thirds of global automotive profits with China being the driving force. McKinseys research indicates China will account for a little more than half with other emerging markets adding 6 billion while well established markets only contributing 4 billion in profits, with almost all that from North America.
Business Strategies: Mergers & Acquisitions
A business strategy is a means by which a firm sets out to achieve its objectives and goals. A firms success depends on its rivals reaction to its strategies it takes. This could be in regard to the prices the firms set, their output levels etc. The automotive industry has an oligopoly market. This is a market which is controlled by a small group of firms...