Strategic Analysis of the Global Automotive Industry

This report provides an analysis and evaluation of common and major global trends and identifies the common business opportunities and their impact on the global automotive industry. Globalization gave the original equipment manufacturers (OEMs) not only the opportunity to expand to the new markets, but it also increased the risk of failure. Since globalization increased competition and gave the choice to consumers, automotive industry needs constant development to meet all consumers’ requirements.

Besides the accelerating competition and diversification of consumers, OEMs today are affected by several factors both internal and external. The external factor are of great importance as the company cannot influence them, but depends on them. Even slight change in one of the factors can seriously affect the company’s performance. The external factors are as follow: Demographics: population growth rates, age, level of education, distribution of income, rural urban ration, and family structure – all these determine demand as well as consumers’ preferences.

Politics: political instability in some countries influences the prices of oil, energy and raw materials, which are vital for OEMs. legislation: the level of government protection, the taxes and duties, barriers to trade, etc. Technology development: new technologies, new flexible assembly lines, etc. Cultural factors Socio-economical factors: fluctuations in exchange rates and interest rates, the oil and raw material prices; the salaries of the workers, etc. The internal factors are: Customers: their preferences, expectations, etc.

Suppliers: rising prices of raw materials, failure to deliver orders in time, transportation costs,etc. Distributors Competitors: financial strength, market share, efficiency of distributor network, customer loyalty, etc. Today, the increasing prices of energy, especially oil, and antipollution pressure from different environmental organizations, force OEMs to focus on producing eco friendly cars and cars on alternative biofuels. The companies tend to shift the production to emerging market, where they gain access to cheaper raw materials and labor, as well bigger markets.

Since the global safety standards of automotive industry are increasing, companies need to improve the qualities of the products, as any slight defect may have high price for the company. Thus the tough competition in automotive industry compels producers to foresee all possible changes in this industry and try to avoid risk of failure. So, the automotive companies need a survival strategies if they want to prevail in modern tough economic environment.

In order to be able to compete in modern conditions, the company needs to formulate its survival strategy with the emphasis on the following aspects: public image: good reputation is more effective than expensive advertisement; customer service: the customers must trust the company; producer is attentive to customers needs, discontents, and remarks; effective customer mapping and grouping: the company is able to focus on preferences of particular groups and diversify its production more effectively;

flexibility: the company must react immediately on any change in the external and internal environment, even if it is insufficient; it must try to leave the competitors far behind itself; establish strategic alliances: get suppliers, distributors, and some times competitors involved in production process. As an example, Toyota joint venture with Ford, Volvo, Nissan.

The company gets the opportunity to partially control competition, increase productivity and reduces the risk of market failure; effective communication between management at all levels: promotes transparency and increases productivity, as it is easier to share information and to solve problems without suspension of production; human resource management:

base the production process on high-skilled workers and workers with big experience; let them share their ideas about rationalization of production, give them opportunity to participate in continuous development of the company; safety standards: continuous quality improvement as the vehicles must be reliable; diversification operations: avoid producing all parts of vehicle on one plant, as in emergency cases the production will stop and company face financial losses; investment in research and development: focus on production of ecologically friendly vehicles, hybrid cars, vehicles on alternative biofuels, etc.