Structure of the Industry
Globalization has invoked extensive debate over its impact and credibility, giving rise to a number of perspectives. The area that permits people and different industries to focus on what they do best is competition, and global markets encourage efficiency on this area. It offers greater opportunity for industries to tap into more and larger markets around the world. Industries could now have access to more capital flows, technology, cheaper imports, and larger export markets. Industries are compelled to vie globally due to the competitive environment.
The car industry, like any other industry, is also affected by globalization and it has undergone significant structural changes provoked by external forces. The automobile industry is currently in a situation where some are doing better than others. Basing on the demand of the existing market, it could be observed that there are companies which are performing better or worse than the others. While its oligopoly market structure has not changed, the industry still underwent changes especially in the global environment. There is shakeout and consolidation of giant suppliers.
The number of giant suppliers is decreasing as there is a search for deep technical expertise, efficiency, and equipped with agile manufacturing techniques. The market of the car industry has shifted from local to global markets. Globalization pushes the industry to expand in foreign markets and the advent of Internet has also helped in reengineering the entire supply chain. The new electronic options allow customers and suppliers to lower costs and prices, compress cycle time, automate simple transactions, increase accuracy, and decrease service response time.
The car industry is more active in technology and engineering innovation to be able to attract the target consumers and original equipment manufacturers are now seeking integrated solutions with higher quality and longevity products and components. Global Business Context of the Car Industry People in the modern world are living in a chaotic evolution period to a new age defined by global competition, rampant change, faster flow of information and communication, ever-increasing business complexity, and pervasive globalization.
The rate of change has become so fast that it took different type of companies to dominate and mark entirely new era of business. More far-reaching technological advances and consumers who have adjusted to this quicker pace and whose unpredictable preferences are modified with the speed of television commercial and Internet also characterize this new environment. Globalization has invoked extensive debate over its impact and credibility, giving rise to a number of perspectives. However, increased globalization has prompted remarkable economic growth around the world.
It has led to job opportunities in making the products that are exchanged with different countries. This has produced specialization and comparative advantage. The power of foreign competition has encouraged domestic industries to innovate and it has allowed resources to flow to their highest use as well. According to Hill (2000), between 1980 and 1985 the total world output grew 40% while world trade grew 70%. Further, he explains that the world output has been growing on an average of 2. 7-2. 9% yearly while world trade has been rising to 5-7% since 1992.
The World Bank estimates that rich industrialized nations have increased their economic output on average 2. 9% since 1992 while developing countries have increased their output on an average of 5. 6%. If these trends continue, China’s economy could be larger by 40% than the US economy by the year 2020. Also India’s economy could grow larger than that of Germany. The area that permits people and different industries to focus on what they do best is competition, and global markets encourage efficiency on this area.
It offers greater opportunity for industries to tap into more and larger markets around the world. Industries could now have access to more capital flows, technology, cheaper imports, and larger export markets. Industries are compelled to vie globally due to the competitive environment. The car industry, like any other industry, is also affected by globalization and it has undergone significant structural changes provoked by external forces. The automobile industry is currently in a situation where some are doing better than others.
Basing on the demand of the existing market, it could be observed that there are companies which are performing better or worse than the others. The difference has occurred in the preferences of the consumers and the changes in the environment. The consumers want cars that are easier to drive. Numerous people are now getting more environment-conscious. Moreover, the continuous increase of gasoline prices are pressuring people to realize that running a car is not free, hence they need vehicles that use lesser fuel and environment-friendly as well.
Consequently, companies in the present day market compete with one another with various measures such as product differentiations, advertisement, etc. to attract more consumers. Every company makes diverse measures to expand profits and to protect themselves from their competition by making use of patents and know-how, and by attempting differentiation through brand names and product functions. Structure of the Industry The car industry at the end of the nineteenth century was pure flux and partial whimsy.
It was hundreds of men tinkering in barns, garages, and dirt-floored machine shops. Carriage makers, buggy builders, bicycle mechanics, wagon wheel manufacturers, machine parts makers, and an exotic melange of undercapitalized entrepreneurs wrestled with the possibilities of manufacturing an auto-mobile, a self-propelled vehicle, a machine that moved itself under the control of its human operator. It was a time of technological and cultural free play in which a machine and basic ways of living, working, playing, and courting were on the verge of being integrated in unanticipated ways.
The English Language itself-with much borrowing from the French (chassis, limousine, garage, chauffer, and automobile) would have to be squeezed and reshaped in order to build a vocabulary that could incorporate the construction of a way of being in the world-riding-in an auto. Given the right kind of imagination, it was a fantastic moment (Farber, 2002). Before globalization, there is a continuing decline in the number of manufacturers in the car industry while large producers have accounted for the increasingly predominant share of output.
This is because there were only a few number of large-scale production manufacturers that could afford to possess sufficient capital for the mass production of high-value product such as cars. Against the background of market expansion and rapid technical development, there had been a great increase in productive capacity and the surviving manufacturers operate under conditions of vigorous competition. This usually takes the form not so much of price competition as of attempting to produce models which possess some special features and which give better value than those produced by competitors.
Thus, the structure that existed pre-globalization was an oligopolistic market where there are few different suppliers/producers exist within the industry. The suppliers are identified as the Big Five namely British Motor Corporation, Ford (wholly US owned), Vauxhall (wholly owned by General Motors US), Rootes (now in association with Chrysler US) and Standard-Triumph International (Leyland Motor Corporation) (Flower, 1981). BMC was formed in 1952 on the merger of the Austin Motor Company and Morris Motors.
Standard-Triumph International became a subsidiary of the Leyland Motor Corporation in 1961. When allowance is made for these changes, it may be noted that the same concerns produced more than ninety per cent, of car output in 1937. The small ‘specialist’ producers include Jaguar, Rover and Rolls-Royce. The number of such producers has also been reduced by several mergers, amalgamations and closures since the war, and their combined share of the market has tended to decline.