Environmental Analysis of Car Industry

This report discusses the forces shaping the business environment of the car industry, including innovation, PESTLE analysis, increased competition, Porter's five forces, and SWOT analysis. It also explores the opportunities and challenges presented by these forces and how firms can gain a competitive advantage.

Environmental Analysis of an
industry - Assessment 1

INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business Environment has significantly changed in recent times and forces changing the
environment also have increased. These forces have made significant impact on the car industry
as well, several factors has evolved and involved in the changes of car industry. The impact of
changes of business environment in Car Industry leads to development of electric cars. Electric
cars are different from traditional conventional cars and consider important environmental factor.
This report will discuss about forces shaping business environment of car industry and changes
that industry has faced in last few years. Followed by this report will also discuss about
opportunities and challenges presented by these forces and what enables firm to get competitive
advantage.
MAIN BODY
Major Forces Shaping the Business Environment of the Car Manufacturing Industry
There are several forces shaping and affecting car manufacturing industry and its
discussion is as follows-
Innovation
This is one of the most important forces to shape the business environment of car
manufacturing industry. Innovation has brought many of the elements in the industry which
electric car is one of the important elements that has changed the dynamics of the car
manufacturing industry. Every business in car industry is now placing importance on the electric
vehicles and this is because of benefits of electric vehicles. Electric vehicles offer benefits for
environment and in cost aspects of the cars (Beer, 2018). This is the reason that popularity of
electric vehicles and cars has increased and this increase in popularity required companies to
adopt the electric car manufacturing and now companies are focusing on enhancing quality of the
electric cars. Along with this innovation also brought changes in product life cycle of the car
manufacturing industry. This can be explained as-
Product Life Cycle

Product Life Cycle can be defined as amount of time in which a product goes from its
introduction into the market to its decline and until it is taken off the shelves. Product Life cycle
involves four stages that are introduction, growth, maturity and decline. This means that product
firstly gets introduced and last stage in decline when sell of the product in market comes to rapid
decline. Innovation has made immense effect on the product like cycle of the car manufacturing
industry and this mainly includes accelerated pace of disruptive innovation. This makes
significant impact on the car manufacturing industry’s product life cycle. Changes that has been
experienced by the industry involves shorter product life cycle (De Stefano, Montes-Sancho and
Busch, 2016). This is because changes in product development cycle as product development
gets faster it make direct impact on the product life cycle of the car manufacturing industry.
PESTLE Analysis also provides forces that are playing key role in shaping the business
environment of car manufacturing industry. Forces in this are
Political
This is one of the important force shaping the environment and this is also one of the reason that
car manufacturing industry have experienced changes. This force involves governmental rules
and policies. In recent times government is making several efforts to promote the electric cars.
the reason behind this is environmental force and factor, this means increasing negative impact
of traditional conventional engine cars is requiring to adapt to options that are environment
friendly and this is why many governments are providing monetary benefit for buying electric
cars.
Economical
Electric cars are less costly to maintain and innovation has made it possible to buy electric cars
in affordable price (Reinhardt and et.al., 2017). This is how this force is shaping environment.
Car manufacturing organisations are requiring creating cars that are electric and cost friendly.
Social
This force of environment is concerned with customers of the industry. Because of positive
environment impact of electric cars customer trends has also changed. Customers are also
changing their perception towards electric cars. Other than this, driverless cars are also being

preferred by the customers and for car manufacturing industry it is very important that they
consider customer opinions and adapt required changes.
Technological
Technology is playing key role in shaping business environment of the car manufacturing
industry (Achinas and et.al., 2019). Innovation is directly linked with changes in technology and
car manufacturing companies are requiring changing their processing according to changes in
technology. Electric car manufactures are constantly working on improving the technology of the
cars through which they can improve the quality and efficiency of the cars. improvement in cars
and their technology in past few years is also a result of changes that have been created by car
manufacturing industry in past few years.
Legal
There are several elements in this force of the environment. This force of the business
environment of car manufacturing industry is the one which regulates the industry and its
operations. However, in relation with car manufacturing industry safety regulations are very
important and enhanced regulations for the safety of vehicles has brought changes in orientation
and priorities of the car manufacturing industry. In this car manufacturing organisations
constantly are under pressure to ensure highest standards of the safety.
Environmental
This is one of the key reasons that car manufacturing industry is changing and this is one of the
important reason for introduction and increased popularity of electric vehicles (Achinas and
et.al., 2019). Presently most of all the organisations in car manufacturing industry are working on
development of electric vehicles and reason for this is that environmental impact of electric
vehicles in considerably very less than traditional conventional engine vehicles. Companies are
also requiring reducing their carbon footprint and adapting to more sustainable ways of working
and concerned with this electric vehicles are expected to play major role.
Increased competition

This is another important force shaping the car manufacturing industry. This means that
along with increasing pace of disruptive innovation companies is also experiencing disruptive.
This is one of the important forces shaping the business environment of car manufacturing
industries (Dijk, Wells and Kemp, 2016). Companies are facing and giving strong competition
by enhancing their effectiveness and along with this bringing different product in market.
Technology innovation has become key for this strong competition in car manufacturing
industry.
Porter five forces
Firm maintains strategic measures that can focuses on several challenges that are outlined. It
focuses on the innovative ways to manufactures electric vehicles that can be relied on the
strategies that can able to tackle the external factors within industry of automotive forces analysis
also known as Porter’s model that focuses on prioritise competitive rivalry within its
multinational business. This model enable in finding out the competitive advantage within
industry. It shows the five force which shape industry and give overview about how much
competition exists within it .Here, there are 5 elements in it which are defined as below
Threats of new entrants- It refers to those firms who are ready to enter within the industries ,it
may be due to lack of entry as well as exist barriers so in electric car industry that threat of new
entrants is high as many automobile firms are entry in this sector.
Competitive Rivalry
Firm operates within highly impact regarding competition on the energy and automotive
solutions industry environments. Within such things the external factors as well as their
accountable for competitive rivalry are given below
 Few organisation (considered as weak force)
 Lower cost ( considered as a strong force)
 High aggressiveness of organisation (considered as a strong force)
With high competition industries that focuses on low returns as cost regarding competition is
very high. Here within car industry it is known as oligopoly that aids to minimize the impacts
regarding price oriented competition. The carmakers understands the price related competition
that are not vital leads to enhance marketplace’s size. Basically they needs to avoid the

competition that is price based. Every year firm can update their cars as this is considered as a
design of a car.
Bargaining power of suppliers- Here the automobile firm decided to switch their suppliers as a
result there is a demand of the manufacturer. As it says that if there are many suppliers than it
becomes easy for firms to switch suppliers from one to another. In this case supplier is having
low power to impact the raw prices of products.
Bargaining power of buyers- It states that when there is large number of buyers than they
posses less power to impact the price of products but if consumer base is small than buyers
posses more power to impact the prize of products (Scawthorn. and Porter, 2019).
Threats of substitutes – it means if there are more number of substitutes products available to
fulfil consumer’s needs than they can easily switch from one product to another but in electric
car industry there were no substitutes products (Anand, 2018) .
SWOT analysis
It is an environment model which is used to analyse internal environment of an industry. It
enables in finding out what are factors which is affecting industry. Moreover, there are some
drivers as well in it which are identified in it. This consist of strength, weakness, opportunity and
threat. Similarly for electric car industry as well SWOT analysis is been done which is described
as below
Strength
It is identified that car industry is growing rapidly in present times. There are variety of cars
which is provided to customer. It is largest industry in world which contribute in economic
growth of developed as well as developing countries. High rise in investment within sector has
led to increasing market value of electric car industry. High tech and newly designed car are
available for customer that range from middle to high (Grant, 2016).
prices. A large customer base in niche market and generating huge revenue and sales from it
Weakness

There is high competition within the industry as there are many companies operating in it. People
are not aware about use of electric cars due to which there is no change in their needs. Low
buying power of people of developing countries restricts them to buy electric cars. Thus, they
focus on buying petrol and diesel ones. There is lack of infrastructure related to production of
battery and setting of electric station at Highway in developing countries is limiting growth of
industry.
Opportunities
There lies vast opportunity for growth for car industry. They can develop new product that is
electric cars and provide it to customer. It will helpful in saving environment and protecting it.
The use of technology such as AI, IOT in cars will allow in reducing costs of it. Thus, it will
enable in producing low cost cars. The expansion and use of electric cars in global economy will
allow companies to expand in other countries and produce cars. There may be development of
factories of producing batteries and setting of battery stations. So, there is rise in employment as
well. With change in CSR policy and focus of government on protecting environment electric car
industry may rapidly grow in future Change in shift of taste of people to environment protection
may enable in producing more cars to fulfil their needs.
Threats
A high rise environment pollution can be a threat to car industry as it may led to decrease in
production. This may impact of growth of electric cat industry. There may be rise in competition
in electric car as many new entrant may enter in it. Hence, there is intense competition among
them. There may be rise in electricity cost which may be lead to rise in battery cost, which will
in rise in manufacturing of cars (Grant, 2016).
CONCLUSION
From the above study it had been concluded that Electric vehicles offer benefits for
environment and in cost aspects of the cars Product Life cycle Changes that has been
experienced by the industry involves shorter product life cycle. In recent times increasing
negative impact of traditional conventional engine cars is requiring to adapt to options that are
environment friendly and this is why many governments are providing monetary benefit for

buying electric cars. Electric cars are less costly and working on improving the technology in
past few years car manufacturing ensure highest standards of the safety requiring reducing their
carbon footprint environmental impact of electric vehicles in considerably very less than
traditional conventional engine vehicles.

REFERENCES
Books and Journals
Achinas, S and et.al., 2019. A PESTLE Analysis of Biofuels Energy Industry in
Europe. Sustainability. 11(21). p.5981.
Anand, R., 2018. ANALYSIS OF FINANCIAL PERFORMANCE OF AUTOMOBOLIE
INDUSTRY IN INDIAA Case Study of Key Players.
Beer, A., 2018. The closure of the Australian car manufacturing industry: redundancy, policy and
community impacts. Australian geographer. 49(3). pp.419-438.
De Stefano, M.C., Montes-Sancho, M.J. and Busch, T., 2016. A natural resource-based view of
climate change: Innovation challenges in the automobile industry. Journal of Cleaner
Production. 139. pp.1436-1448.
Dijk, M., Wells, P. and Kemp, R., 2016. Will the momentum of the electric car last? Testing an
hypothesis on disruptive innovation. Technological Forecasting and Social Change. 105.
pp.77-88.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Reinhardt, R and et.al., 2017, June. Macro environmental analysis of the electric vehicle battery
second use market. In 2017 14th International Conference on the European Energy
Market (EEM) (pp. 1-6). IEEE.
Scawthorn, C. and Porter, K., 2019. Enhancing Resilience through Risk-Based Design and
Benefit-Cost Analysis. The Bridge, 49(2).