Global Business Environment TABLE OF CONTENTS

GLOBAL BUSINESS ENVIRONMENT TABLE OF CONTENTS INTRODUCTION 1 TASK 1 a) PESTEL analysis of global auto mobile industry 1 b) Porter's five forces of Global Auto-mobile industry4 CONCLUSION 7 REFERENCES 8 INTRODUCTION Global business environment refers to economic activity which take pace through the world by participating or expanding market in different countries. Automotive industry consists of a process of manufacturing, designing, developing, selling, marketing of motor vehicles by a wide range of companies an industry

GLOBAL BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
a) PESTEL analysis of global auto mobile industry...................................................................1
b) Porter's five forces of Global Auto-mobile industry...............................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Global business environment refers to economic activity which take pace through the
world by participating or expanding market in different countries. Automotive industry consists
of a process of manufacturing, designing, developing, selling, marketing of motor vehicles by a
wide range of companies an industry in world. Automotive industries began in 1860. This essay
refers to a case study of car production surges in eastern Europe. This case study is about shifting
of automotive industry from western to eastern European countries. Peugeot is a French
manufacturing industry of auto-mobiles. It shifts a plant from Ryton to Slovakia. Another
Porsche is a German manufacturing industry which makes body in Slovakia but do finishing in
Germany to save cost. This essay will analyse the influences of shifting automotive industry
from west to east on society and people of both eastern and western European countries. Money
is spent like a flow of flood for building manufacturing plant in eastern European countries. This
essay will include a pestle analysis to analyse environmental factor which affects global business
environment and also outlines porter's five forces for analysis competitive market which affects
automotive industries in eastern European countries.
TASK
a) PESTEL analysis of global auto mobile industry
Automotive industry refers to a group of companies which are responsible for
manufacturing, designing, developing, selling, marketing of motor vehicles. It is listed in top of
economy sectors in terms of revenue (Pavlínek, 2017). Automotive industry do not include the
repairing and maintenance of vehicles from delivering from one user to another user. This essay
follows a case study of car production surges in eastern Europe. In this, auto mobile market of
Europe is shifting from west to east. It results in a flow like a flood where even local car makers
are in list of building their own factories in different countries like Poland, Slovakia, Hungary,
Romania and the Czech Republic. Let's see the pestle analysis to evaluate the environmental
factors which influence car production surges. Pestle analysis stands for political, economic,
social, technological, legal and environmental factors.
Political factors
For starting an automotive industry in country, it needs to take a support from political
leaders and officers of government. It makes the accessing process easier and consumes less
time. Like at the inauguration time of auto mobile factory in Slovakia, prime minister and
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officers of government attended the event. In 1989, political government started communism due
to which many local car makers rushed to eastern Europe countries like Poland, Romania,
Hungary, Slovakia. Money was in flow mode for building manufacturing factory of car. It
results in shifting of automotive industry from western Europe to eastern Europe. It is like an
expanding global market from one country to another country. Challenges are faced by
companies like Ford, Toyota, Suzuki, Volkswagen, Audi for accessing more market and winning
the competition (Fagerberg, Laestadius and Martin, 2016).
Economic factors
Automotive industry is highly responsible for economic growth of country by emerging
more and more revenue. When a country is facing financial crisis then it can be overcomes
through by good selling of motor vehicles by automotive industry. Czech Republic double its
production cost by selling more than a million cars by 2010 (Dale and Fabry, , 2018). It is also
expected that Russian production is raised from 1.2 million to 1.6 million cars. United states to
increase production by 9% and Japan to increase its production by 2%. Britain is on decreasing
factor from 1.8 million to 1.5 million in 2005. By investment in central and eastern Europe by
Asian countries and united states, exceeds 2.4 million vehicles. In 2005, It results in listed in top
20 auto-mobile production nations. Eastern Europe do not included only manufacturing of small
cars in, it also includes an assembling of Touareg S.U.V. and Q7 of Audia in Slovakia. Increase
in prices of gas also influence customer preference and get shifted from big cars to compact cars
in eastern Europe (Paik, Kwon and Chen, 2017).
Social factors
Automotive industry impacts on society by offering employment opportunities to people.
It also sometimes results in unemployment. Like, when Volkswagen stop manufacturing cars in
Belgium, it results in loss of 4,000 jobs. There is also a case when Peugeot opened a plant in
Tranava, it eliminates 11000 jobs in western Europe because of stopping a plant in Ryton. Due to
shifting auto-mobile industry in Europe, only in Slovakia, engineers earn half of the western
Europe engineers earn. Eastern European countries aims to increase number of jobs by 284,507
in 2004. It was 235,826 jobs five years earlier. At the same time, job falls down from 1,978,338
to 1,991,848. This influences life of people in society of western Europe due to unemployment.
Also, trained engineers are needed by automotive industry due to which education level is rising
and society are in a condition to launder money. But it is analysed that unemployment is changed
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from 13% to 5% over a region of 70,000 people. People style and choice also influences the
market of automotive industry (Gstöhl and De Bièvre, 2017). Like in Ryton, selling of vehicles
is not good due to which Peugeot took a decision to stop factory.
Technological Factors
Bringing innovations and technology is responsible for emerging markets of automotive
industry nowadays. Large money is invested in research and development process of
implementing innovations. Like companies like Ford, Toyota, Suzuki, Volkswagen, Audi,
Hyundai are researching for environmentally friendly and low emission vehicles. At a time
spokeswomen of association of European Auto-mobile manufacturing said that “making a car is
not like a making of plastic bag”. It means that skilled and talented engineers are needed for
manufacturing car with better efficiency. Due to shortage of skilled labour, price of labour is
increasing highly. European car makers produced a different top new models that will be
assembled in eastern European Plants. For example, a model is launched in Romania by Renault
which is a four-door car priced at 5,700 euros. This results Europe to a price market where
customers buy at low price. There is also a case of ford where it implements technology in
producing a model of car which is first assembled in Valencia and Spain, now, it takes a new
emerging market to assemble in Tichy, southern Poland.
Legal factors
Legal laws that are made by central government of each and every country impacts the
profitability, productivity and performance of any organisation. Vehicles are made under the
laws of quality and safety (Marius-Răzvan and Camelia, 2015). To control air pollution,
companies are focussing to manufacture environment friendly motor vehicles. But due to shifting
of automotive industry from west to east, union leaders of Ryton are irritated. Ryton union
leaders declared shifting of automotive industry like Renault a Vandalism. But Peugeot leaders is
satisfied by saying that unemployment is about only 4% and workers can find new jobs in other
sectors but only some benefits and wages will be less than before. Other tax laws need to be
followed. Like in Slovakia, in building new factory, all low-flat and simple tax on employee
wages and company profit is about only 19%. Eastern European government is offering
incentives for employees for better sale of motor vehicles.
Environmental factors
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As Global warming is major destructive factor for world. So to control air pollution, it is
a challenging task for auto-mobile industry to manufacture environment friendly motor vehicles.
Low emission vehicles are to be produced. This factor will consist of technological and social
factors because environment is influenced by both. As unemployment is increasing in western
Europe countries due to which their leaders are in helpless condition which affect the society
environment and can lead to a fight between eastern and western European countries. Dueto
changes in marketing and selling, Local government is focussing to make local marketers
champions like Skoda in Czech Republic and dacia in Romania. But some auto makers are
bought by big automotive industries like Skoda is acquired by Volkswagen and dacia is acquired
by Renault.
b) Porter's five forces of Global Auto-mobile industry
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Porter's five forces refers to a model which identifies competitive factors that helped to shape the
industry by determining strength and weakness of own industry and other competitive industry.
This porter's model can be applied to any unit of organisation for increasing profitability and
productivity. Five forces includes competition, potential of new entrants, suppliers, customers
and threat. Let's apply these five forces to automotive industry which is shifting from western
European countries to western European countries (Pavlínek, 2015).
Competition
This factor is to analyse the competitive market. As automotive industry is rising
competition between western and eastern countries of Europe. Peugeot, a large French
manufacture company of automotive chosen Slovakia, an eastern European country to build a
manufacturing plant of auto-mobiles. Due to less marketing and sales of vehicles in Ryton,
Peugeot need to stop plant which results in unemployment. Due to competition, Volkswagen
stop production in Belgium. Due to competition in each and every company of automotive
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Illustration 1: porter's five forces
Source: (What is Five Forces Analysis? 2017)

industry, labour cost is increasing highly because skilled and talented employees are needed and
they are less. France and Spain, western countries, gain a competitive advantage from others by
having small car production. Competition do not lead up to only small cars, it also leads to big
card by producing Touareg S.U.V. and Q7 of Audi (Rodwin and Sazanami, 2017).
Potential of new entries
This force is used to analyse the new companies that has the potential to get entry in
existing automotive industry. It includes government policies and procedures for entering a new
company. Strong strategies to be made by new company for winning competitive advantage. For
example, in a Paris auto show, Renault introduced a Logan, a four-door car which is assembled
in Romania, starting at 5,700 euros in Eastern Europe. This benefits to consumers to buy a new
technological car at low price. When Ford introduces a successful model, the Ka, which is
assembled in Valencia and Spain, it will be built with a sharing of Ford and the Italian auto
maker Fiat in Tichy, southern Poland. General motor planned to open a plant at St. Petersburg
for assembling Chevrolet Captive by 2008. This results in increase up to a $127 million plant
which produced 25,000 vehicles per year. Eastern European government is offering incentives to
employees who are working in automotive industry based on productivity and profitability of
industry.
Power of suppliers
This factor is responsible for analysis the suppliers of material that are used in
manufacturing of motor vehicles in automotive industry. At a time in 2012, when automotive
market slowed down, demand for automotive components also gets decreases. Likewise, Porsche
, a German manufacture of automotive assembles body of Cayenne near Bratislava(capital of
Slovakia) and for finishing purpose it reverts back to Germany. Similarly, Peugeot hire steel
coils from mills in France, Austria and Germany for Trnava Plant. But they plan to begin Slovak
steel for next year when U.S. Steel offers at $160 million hot-dip galvanizing mill which will
able to make 385,000 tons of auto mobile-grade steel sheet in Kosice, eastern Slovakia. Faurecia,
the Peugeot company manufacture seats for Tranava plant. Slovakia, Poland and Czech Republic
have been trying to attract suppliers for big assembly plant Hyundai. It is building in the eastern
corner of the Czech Republic (Molle, 2017).
Power of customers
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This factor analyses the number of customers that an industry has. Customers are
responsible for success or failure of any industry. It reflects the switching of customer from one
company to another company. It can be because of offered cost or product specification and
quality. It maintains the retention of customers towards a particular company. Due to failure of
sales of vehicles in Ryton, Peugeot needs to shifting plant from Ryton tom Slovakia. Dealers are
also a part of customers because they buy the products directly from manufacturing industry. It is
expected from General motors that to expanding dealer network from 80 to 480 (Dachs and
et.al., 2019). Prices of competitive models should have differentiated strategy for more
development. Customers shifted from big cars like S.U.V. to compact cars in eastern Europe due
to increase in price of gas.
Threat of substitutes
Threats to automotive industry is due to used cars, bikes, bicycles or public transport. For
long distance purpose, trains and air planes are substitutes against motor vehicles. One of the
reason to use second hand cars is that of financial crisis that are facing by people of country.
Sluggish auto industries under the old Communist regimes left many families without cars. Local
governments is focussing to make local marketers champions like Skoda in Czech Republic and
dacia in Romania. But some auto makers are bought by big automotive industries like Skoda is
acquired by Volkswagen and dacia is acquired by Renault. Due to increase in price of gas,
customers are shifting from big cars to compact cars in eastern Europe. But due to cheap labour
in eastern Europe makes a benefit that it do not have a threat of substitutes (Froggatt, 2017).
CONCLUSION
This essay summarised about car production surges in eastern Europe. Due to failure in
marketing and selling of motor vehicles in western European countries, industries are shifting to
eastern European countries. Peugeot has shifted its manufacturing plant from Ryton to Slovakia
because of failure. Trained engineers are needed for manufacturing of cars because it is analysed
that to manufacture a car is not an easy task like manufacturing a plastic bag. So due to less
presence of skilled labour for manufacturing, it increased the cost of labour for eastern European
countries. Due to shifting of automotive industries. It resulted in unemployment in western
countries were there is a loss of jobs from 1,978,338 to 1,991,848. Main challenge is faced by
automotive industries of having shortage of skilled labour. Every company is focussing on
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launching a new model so that it gains competitive advantage. This essay analysed the
environmental factors by having Pestle analysis. Manufacturing growth is increasing highly in
European countries. It is been analyses that wages are not the critical factor of growth of a
country, it is the material which is used in manufacturing of motor vehicles play a major factor in
growth of economy of country. It is been said by union leaders of eastern European countries
that western labour can found new jobs by compromising in wages and benefits. Engineers in
Slovakia only earning half of the western European Country of automotive industry .Competitive
factors are analysed under porter's five forces in which power of suppliers and customers are
evaluated. It also analysed the threats for automotive industries which took place in eastern
countries like for Skoda and Dacia which are acquired by Volkswagen and Renault respectively.
It's all can be concluded that eastern Europe became a backyard manufacturing centre for
automotive sector.
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REFERENCES
Books and Journals
Dachs, B. and et.al., 2019. Backshoring of production activities in European
manufacturing. Journal of Purchasing and Supply Management.
Dale, G. and Fabry, A., 2018. Neoliberalism in Eastern Europe and the former Soviet
Union. The SAGE Handbook of Neoliberalism. Thousand Oaks, CA: SAGE. pp.234-247.
Fagerberg, J., Laestadius, S. and Martin, B.R., 2016. The triple challenge for Europe: The
economy, climate change, and governance. Challenge. 59(3). pp.178-204.
Froggatt, D., 2017. Motor components: locational issues in an international industry.
In Restructuring the global automobile industry (pp. 156-168). Routledge.
Gstöhl, S. and De Bièvre, D., 2017. The trade policy of the European Union. Macmillan
International Higher Education.
Marius-Răzvan, S. and Camelia, S., 2015. Analysis of the intra-industry trade for the motor
vehicle parts and accessories sector from romania. Procedia Economics and
Finance. 22. pp.343-352.
Molle, W., 2017. The economics of European integration: theory, practice, policy. Routledge.
Paik, Y., Kwon, J.W. and Chen, D., 2017. Global Business: Connecting Theory to Reality.
Routledge.
Pavlínek, P., 2015. The impact of the 2008–2009 crisis on the automotive industry: global trends
and firm-level effects in Central Europe. European Urban and Regional Studies. 22(1).
pp.20-40.
Pavlínek, P., 2017. Dependent Growth: Foreign Investment and the Development of the
Automotive Industry in East-Central Europe. Springer.
Rodwin, L. and Sazanami, H., 2017. Industrial change and regional economic transformation:
the experience of Western Europe. Routledge.
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Online
What is Five Forces Analysis? 2017. [Online]. Available through. <https://www.visual-
paradigm.com/guide/strategic-analysis/what-is-five-forces-analysis/>.
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