Industry Analysis of Automobile Sector in UK

This report provides an analysis of the external and internal business environment of the automobile sector in the UK, including a PESTEL analysis and Porter's 5 Force Analysis. It also includes an analysis of the internal business environment of Aston Martin using the Value Chain Model.

Running head: INDUSTRY ANALYSIS
Industry Analysis
Name of the Student
Name of the University
Author Notes

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Table of Contents
Introduction......................................................................................................................................3
Brief Outline of the Industry Classification Benchmark (ICB) of Automobile sector of UK.........3
Analysis of the Micro and Macro Environmental Analysis of Automobile sector of UK..............4
PESTEL.......................................................................................................................................5
Porter’s 5 Force Analysis.............................................................................................................9
Internal Business Environment of Aston Martin...........................................................................12
Analysis of internal business environment of Aston Martin using Value Chain Model...............14
Recommended adaptations based on the value chain service....................................................15
Reflections based on the five force model.....................................................................................17
Reference.......................................................................................................................................19

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Introduction
The automobile subsecorof UK is famous all over the globe mostly because of their
ability to manufacture some of the most premium and luxury cars. They are also specialized in
the manufacturing of exporting the major sports cars in the global automobile market. A
significant part of the nation’s economy is also controlled by the business growth of the
automobile subsector. The current turnover rate of the overall industry is estimated to be that of
77.5 billion pound along with 18.9 billion pound. Nearly 170,000 people are either directly or
indirectly employed within the industry. The total goods export value accounts for nearly 12 %
of the export trade market of UK. There are more than 30 manufactures within the industry that
yearly contributes 4 billion pound on the research and development of the development in the
automobile sector (Law 2017).
The current report will discuss about the external and internal business environment
within the region of UK. This will help in the analysis of the competitive environment that is
present within the industry and thereby able to deal with the issues of poor rate of economic
growth. The report will also describe the internal business environment of the Aston Martin
brand and provide description of the value chain analysis. In the final section, a reflection will be
provided based upon the analysis of the competitive environment.
Brief Outline of the Industry Classification Benchmark (ICB) of Automobile sector of UK
The Industry Classification Benchmark is one of the universally used tool that is
implemented for the classifying an industry based upon their size and the manufactured product.
The standardized unit for an industry is also described with the help of this element. The
category of ICB is divided into 10 major industries of the world, each of which are further

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divided into 19 super sectors. The super sectors are than further divided into 41 sectors that
includes 119 sub sectors, comprising of various products and services (Becker et al. 2013). This,
I believe is one of the effective ways that can be implemented to classify an organization based
upon the products that are manufactured. Each of the companies all around the globe are being
represented in each of the subsectors depending on their type of products and services. This
division is mainly done based on the primary source of revenue of a business organization.
According to the ICB classification, the sub sector of automobile comes under the industry of
consumer goods that are being classified within the super sector of Automobiles and parts. There
are three sub sectors within the sector named automobiles and parts that includes the tires, auto
parts and auto mobiles.
The subsector of automobile forms one of the major section of the UK economy and the
nation’s GDP. It is also one of the major division that is being included under the consumer
goods industry and currently captures nearly 35% of the revenue. The consumer price index
(CPI) is also dependent upon the dependent upon the performance of the automobile subsector.
The market value of the new cars and the resold vehicles also depends upon the consumer price
index. From the economic and the statistical report for the past few many years, it is evident that
the CPI for the car’s value have been rising steadily since 2003, which is now increased to 100.6
to value of 83.9 in 2003 (Hashmi and Biesebroeck 2016). I do strongly believe about the fact that
evaluation of the CPI is highly essential to deal with matters of deciding up the financial plan of
the organization. Few of the major companies under the sub sector of automobile in UK includes
Aston Martin, Jaguar, Land Rover, Rolls Royce, Bentley, Lister Cars, Lotus and many more.
Analysis of the Micro and Macro Environmental Analysis of Automobile sector of UK

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The context of the business strategies, the macro and micro environmental analysis
includes investigation of all factors that determine the performance level of business. It is
important for all business organization and industry to implement upon the business ideas based
upon the external macro and micro environment.
Micro environment generally refers to the internal strength and weakness of the
organization that are needed in the operations of business. Most of the internal factors such as
finance, human resource and marketing are few of the major elements of micro environment. The
level of competitive advantage within an organization is also dependent upon the micro
environment and the capability of the organization to make use of the strengths. It can also be
said that the elements of micro environment are directly within the control of the business
owners and industry stakeholders (Reinhardt et al. 2017).
On the other hand, the Macro environmental factors of business include elements like
political, economic, social and democracy of a local region. In other words, it can also be said
that the factors of macro environment in business are not under the control of business owners
and industry stakeholders. In the context of the British automobile subsector, external business
environment is highly competitive due to the presence of several number of exclusive and
premium brands. Over the long year of history, the British automobile subsector has encountered
several macro and micro environmental change in business strategies. The manufacturing sector
for automobile subsector is one of the major part and source of employment in the British
society. All the brands of automobiles have been able to capture a significant part of the luxury
and sports car market. The country exports nearly 75% of the car that are being manufactured
within the industry (Bailey and De Propris 2014).

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PESTEL
The PESTLE analysis is believed to be one of the most popularly used effective tool that
are used to analyses the external business environment. The major factors of this tool include the
following:
Political
The political factors act as a major influencing agent that decides of on the business
performance of the automobile industry (Rawlinson and Wells 2016). It is important for the
industry to consider the production cost and fuel price, which is a major part of operational
strategies in the automobile subsector of UK. The latest policies implemented by the British
government have a direct impact upon the safety standard procedures that help to minimize the
chances of facing the hazards of road accident and reduce the health hazards. Hence, it is
essential for the car manufacturer to ensure proper safety within the manufacturing unit. It is
essential for the vehicles to have minimum amount of carbon dioxide emission, which will avoid
adverse effect on the environment. It is important for the car manufacturers to consider the
respective business laws for getting government approval and selling a product in the market
(Reinhardt et al. 2017). It is essential for the car manufacturers to strictly follow of the laws and
regulations implemented by the British government for manufacturing automobile units. This
will help to ensure maximum possible safety and minimum environmental adverse effect
associated with the use of vehicles. This can be achieved in the forms of using advanced forms of
technology that can be used in the car engines.
Rawlinson, M. and Wells, P., 2016. The new European automobile industry. Springer.

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Economic
The healthy economic condition and infrastructure in UK has helped the automobile
subsector and the luxury car brands to improve upon their level of business. The high level of
income among the people in UK is considered to be one of the major advantages for the
automobile subsector. This has increased the sales volume for premium brands by 34% (Meng et
al. 2016). The higher rate of production of automobile products has also resulted in increasing
amount of revenue earned by the industry. Due to the expansion of rate of the export market in
automobile product the GDP growth rate of Britain have increased to 1.5% along with
decreasing rate of inflation rate 1.0 % (Wetherly and Otter, 2014)
Social
The changing demography and the social lifestyle of UK population has a major impact
upon the business performance of automobile subsector. Most of the people these days, are
preferring to buy the premium car models. There are also changes in the buying pattern within
the automobile industry, as most of the customers are preferring high amount of comfort. There
is also demand from the customer for producing fuel efficient vehicle. This has resulted in a
larger amount of investment in research and development sector automobile subsector as it can
help to implement innovative automobile mechanism to minimize the oil consumption and
carbon emission (Ho, 2014). It is highly essential for all automobile brands to improve the
quality of engine, which is believed to minimize the amount of carbon emission. The car

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manufacturers are also facing high level of challenge from the public stakeholders to reduce the
volume of carbon emission emitted (Meng et al. 2016).
Technology
Technology is highly integrated with the manufacturing business operation of automobile
industry. All forms of technological gadgets including the smartphones and laptops are highly
popular within the consumers of UK with more than 91% of the people within the society is
using the smartphones. Due to the highly developed technological infrastructure in the British
environment, it is possible for the automobile brands to improve the quality of their engine and
other innovative systems that are integrated within a vehicle. Due to the rise of energy crisis, the
technological development has helped the British automobile subsector to introduce vehicles that
are powered by alternative fuel source. The integration of safety software that includes all forms
of cybersecurity programing has helped to minimize the chances of risks and adverse situations
that are associated with automobile industry (Thai and Turkina, 2014).

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Figure: Using of technological gadgets within the society of UK
Source (Thai and Turkina, 2014)
Environmental
It is highly essential for all automobile brands to improve the quality of engine, which is
believed to minimize the amount of carbon emission. The car manufacturers are also facing high
level of challenge from the public stakeholders to reduce the volume of carbon emission emitted.
Legal
It is essential for the car manufacturers to strictly follow of the laws and regulations
implemented by the British government for manufacturing automobile units. This will help to
ensure maximum possible safety and minimum environmental adverse effect associated with the
use of vehicles (Dey 2016).

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Porter’s 5 Force Analysis
The porters five force analysis is believed to be one of the effective tool that can be
implemented by a business organization to investigate upon the competitive environment. There
are 5 parameters that are used to properly analyse the competitive environment (Yunna and
Yisheng 2014). I do strongly believe that if an organization is able to evaluate the external
threats with the help of the Porter’s Analysis, it is possible for them to implement effective
strategies that are needed to gain effective competitive advantage.
Threat at the entry level
The context of the business environment of Britain, an organization has to face high level
of challenges and threat at the entry level in the automobile industry. This is mainly due to the
existing premium brands in the automobile subsector of Europe. High level of investment and
also required in order to initiate business in the automobile industry. This is mainly due to the
high infrastructural expense and government taxes. Hence, the threat from new entrants are
considered to be low in the automobile sector (Nag et al. 2014).
Threat from substitute
Due to the changing environment in the automobile subsector most of the popular brands
are introducing innovative engine and new style of automobile vehicles. This type of vehicles is
mainly powered by alternative source of energy. As most of the Global automobile brands are
launching vehicles that are powered by alternative and renewable energy sources, the threat of
substitute product is quite high and the British automobile industry.

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Threat from the suppliers
Due to the presence of large amount of suppliers, the risk from this element, can be
mitigated. Most of the automobile brands in the British industry are currently relying upon the
supply from foreign nations, which includes Germany, Japan and USA. Most of the company is
also hire skilled labor workers from Asian and African Nations at much lower cost. as most of
the car manufacturers in Britain are relying upon multiple source of supply from all parts of a
globe, the threat from suppliers are quite low. However, during the time of global economic and
financial crisis, the British car manufacturers have to depend upon local suppliers (Moreno-
Izquierdo et al. 2016).
Competitive rivalry
This is considered to be the topmost threat for all car manufacturers in the Britain
industry. The competition level from the foreign brands including Ferrari, Mercedes Ford and
Toyota has been a major cause of concern for all British car manufacturing unit. All the foreign
companies are providing premium quality product along with innovative technology in the car
engine, which is believed to be one of the major ways to attract the customers. The challenge
level of competition within the automobile subsector is likely to increase in the upcoming future.
This is due to the fact that most of the companies are able to implementing aggressive
competitive advantage policies to implement innovative technology in car manufacturing. With
emerging socio cultural trends in the British environment, the demand for innovative
automobiles are increasing, which is also believed to be one of the major cause of tough level of
competition. The foreign car companies are also planning to make more investment in the UK

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automobile industry. This is also one of the major cause of concern for British car manufacturer,
has they will face the risk of losing market share (Esfahbodi et al. 2017).
Bargaining power of the customers
The customers in an industry have the authority and power to negotiate with sellers to
deal with the level of pricing. as more number of car manufacturers are initiating their business
and the British automobile sub sectors, the customers will have more number of options to
choose upon their brands. Hence, the customers will have the option and authority to switch over
brands if they are not satisfied with the quality and pricing level of an automobile vehicle. The
car dealers also play an important role in deciding upon the customer behavior and the choice of
brand. In the top level of competitive environment, it is highly challenging for all car
manufacturers to maintain high level of customer satisfaction in order to minimize the risk of
losing market share. Hence, the threat from the bargaining power of buyers in the context of the
British automobile subsecoris considered to be high (Porter et al. 2015).
As all the external threats are identified in the context of the automobile industry, I
believe it is possible to deal with the issues related to unfavorable business environment. I also
do believe that in the context of the external business environment, it is essential to deal with the
issues that can compromise upon the sales of business.
Internal Business Environment of Aston Martin
The SWOT analysis tool is believed to be one of the effective way that can be
implemented analyses the internal business environment within an organization. It considers the

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internal strengths and weakness of a business organization, which need to be considered before
implementing business Strategies for using the existing market opportunities.
The Aston Martin company is considered to be one of the major British car manufacturer
in the segment of luxury and sports car. In the following section the internal business
environment of the company is being analyzed using the tool of SWOT analysis
Strengths
The company is established in the year 1913 and has a rich history of legitimacy of
representing famous sports person. With the help of rich heritage, it is easily possible for the
company to reach out to the customers and communicate about their latest marketing policies.
The company has been able to maintain premium quality that is needed for luxury
enjoyment of the owners. They also have a reputation of maintaining superior and innovative
technology in the manufacturing of the car engine. The strong presence of the brand in all major
motor sports event all around the globe has been a major source of advertisement. Hence, it is
easily possible for the company to reach out to wider group of customers.
Weakness
On the other hand, the major weakness for the company is due to the fact that they are not
able to penetrate the international automobile Market. Majority of the revenue and profit of the
company are only limited to British automobile industry. The company also has a limited
product portfolio and therefore, their target group of customers and only limited to the richer
section of the society.
Opportunities

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Expanding range of the automobile market in Britain and Europe is considered to be one
of the major opportunity for Aston Martin. More number of customers in the current are
preferring to buy luxury and sports car. Hence, it is possible for the company to target more
number of customers. This is also possible due to the change in the lifestyle of the people and
improved level of economic condition. The company is also offering competitive pricing in order
to improve upon their market share values.
Threats
The increase in the cost of manufacturing due to elevated cost of fuel and manufacturing
parts are considered to be the major threat for the company. Moreover, as discussed in the
previous section the British car manufacturing industry is facing high level of external threats
due to the market entry of various foreign brands. The company has also not been able to expand
their range of car model and hence, it is not possible to introduce new unit that are being
powered by alternative energy source (Nunes et al. 2016).
Analysis of internal business environment of Aston Martin using Value Chain Model
The value chain model is an important part of the business that are being conducted by
the British automobile industry. The primary activities within the value chain model includes
designing of the product and making plan for resource allocation. In a subsequent step, the
British car manufacturers implement direct selling policy for distribution of product. The cars
can be purchased only from the authorized seller of respective brand. The purchase from the raw
material is also done from various places all across the globe, which helps to ensure that the best
quality of product is being used in manufacturing unit (Ghawana et al. 2016).

15INDUSTRY ANALYSIS
With the help of effective value chain model in Aston Martin, the company has been able
to implement a highly functional supply chain model. The policy of cash to cash is Highly
Effective in the cycle of time, as the company is able to get the latest information directly from
the consumer market. In the year 2011, the company has plans to invest significant amount to
incorporate the IT technology in supply chain unit. The company initiated business partnership
with various car dealing agencies. This has helped the manufacturers to increase their range of
target market and also attempt to penetrate the international automobile industry. The three tire
supply policy has been implemented in order to deal with the changes of the rapidly increasing
range of the automobile industry.
The future growth of the company and their ability to gain competitive advantage is
dependent on the value chain analysis model that are being applied. The supply chain
management procedures that are being implemented as a part of the internal operational
management are considered to be highly robust that often can cause disruption within the global
distribution and supply chain. However, in order to deal with the existing challenge, it is
essential to have effective ways to deal the supplier and distribution groups. The disruption
within the functioning of the warehouse can cause disruption within the overall supply chain.
The rate of productivity is also dependent on the levels of performance within the value chain
units. There is also the opportunity for the company to gain advantage by leveraging the
communication and logistical operations that is being implemented with the better levels of
supply chain management software. This can also enable the company to have better levels of
sustainable growth and thereby achieve the long-term success within the automobile subsector of
UK.

16INDUSTRY ANALYSIS
The company has also introduced several other manufacturing units in the regions of
Wales and St Athan in Glamorgan. This manufacturing units within the system has the capability
to deal manufacture the new-generation of sports cars. With the advancement of the supply chain
and expansion of business in the automobile subsector, the company is able to generate 3000
new jobs that is expected to provide new forms of investment. The new manufacturing unit of
the company is expected deal with the issues and they are able to provide better cost effective
products.
Recommended adaptations based on the value chain service
Being one of the major market holder in the British car manufacturing industry, from my
point of view, it is highly recommended for Aston Martin to improve upon their business
sustainability policy. At the primary level it is important for the company to conduct essential
marketing research by collecting relevant information. This can help the company to implement
effective Change management policy that is needed to maintain upon their market share. As
mentioned previously, the major challenge for all British car manufacturers is due to the increase
in the competition level. Therefore, it is highly essential for the company to consider policies of
the external business environment and competitive policies implemented by the rivals.
In order to gain competitive advantage within tough business environment, I think it is
highly essential to consider innovative and aggressive marketing strategies. The platform of
digital marketing can be implemented that is believed to be highly cost-effective. It is also
possible for the company to reach out wider range of customers. Online blogs need to be
published, which will provide information related to the latest research and innovative

17INDUSTRY ANALYSIS
technology that will be implemented in car engines of near future. This will help to improve the
level of customer awareness.
It is also important for the research and development team of the company to focus upon
designing new engines that will be powered by alternative source of energy. This is also one of
the major corporate social responsibility of the company to consider the matter of environmental
degradation.
In order to deal with the challenges of the external business environment, it is essential
for the organization to improve on the supply chain management. As there are high levels of
threats from other rival brands, the Aston Martin needs to implement better levels of quality
management teams. This will help to ensure that the company will be able to sell better level of
cost effective products.
Reflections based on the five force model
In the context of the existing condition of the British automobile industry, I do believe it
is highly relevant to implement the porter's five force analysis in order to investigate about the
existing competitive environment. With the help of the parameters within the five force I do
think it is quite effective to identify the source of the threats. In case of the automobile subsector
of UK the biggest cause of threats is due to the competitive rivalry and popularity of substitute
vehicles, which operates with the help of battery and alternative forms of fuel. Due to the
increase in demand of automobile units, it is highly essential to analyses competitive
environment before implementing any new business strategy. On the other hand, I also do

18INDUSTRY ANALYSIS
consider about the fact that due to the increase in level of competition the car manufacturers are
forced to provide better quality of product and also bring about innovation in designing card
engine. However, in my opinion the most important policy that needs to be implemented in order
to gain significant competitive advantage is to introduce new car design that is needed to
minimize the effect of environmental degradation. Due to the increase in the hazard level of
environmental degradation that are caused due to car pollutants, I do believe it is one of the
major social duty of all car manufacturers to incorporate innovative style of Technology in car
manufacturing unit.
As mentioned earlier, the threat of substitute is one of the major causes of concerns for
the automobile subsector. Hence, I believe in order to sustain in the consumer market, it is
essential for the automobile companies to invest more in the research and developmental for
alternative forms of vehicles. This is can also help industry to deal with the threats of the
environmental challenges. This can be achieved by introducing innovative styles of engine that
emits minimum amount of carbon gas.

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