Analysis of Car Production in Eastern Europe

The assignment analyzes the increase in car production in Eastern Europe due to various political and economic reasons. It highlights the role of European Union incentives and job opportunities in attracting people to settle in the region, leading to increased car production.

Global Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK 1 ...........................................................................................................................................4
a) PESTLE Analysis...............................................................................................................4
b) Porter Five Forces of Eastern European Car Manufacturing.............................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The global business environment can be defined as the environment in different
sovereign countries, with factors exogenous to the home environment of the organization,
influencing decision making on resource use and capabilities. It encompasses the task
environment of an organization that are being influenced through global forces. Present report
will have based on the case study of Car Production Surges in the Eastern Europe. The study will
provide the upward movement in the production of cars in Europe. It has been analysed that the
production of cars in Eastern Europe is on peek. It will also create more manufacturing jobs in
the four major Central European countries, where the number has already risen to 284,507 in the
year 2004.
TASK 1
a) PESTLE Analysis
Political factors
 Support by government
As the auto mobile factories in Eastern Europe provides employment to almost 3500 people for
which they are gaining support of government. Also, these factories promoting sales which
directly affects GDP of Eastern Europe.
 Low tax on wages and profits
Government offer financing to investment on low simple and flat tax that is highly depended on
wages of employees and corporate profits. By this more opportunities raise by the government
and they tend to invest more.
 Government support to local auto makers
Skoda and Dacia were getting support by Government. The auto makers of Czech republic and
Romania were bought by western car-makers. This saves them from ruining and hence motivates
them by getting acquired.
Economical factors
 Cheap labours
After 1989, Skoda was a local auto maker which was acquired by Volkswagen and another local
auto maker was Dacia which were bought by Renault. By these companies need huge labours
and labours at Eastern Europe is cheapest among all regions.
 Increase in Employment

In Eastern Europe, auto mobile factories are engaging in production of cars of almost 300000
cars per year. Production of cars need workforce, by which factories hire 3500 employees in
their entities (Bansal, Jiang and Jung, 2015). This increases employment ratio of Europe.
Socio cultural factors
Auto mobile factory which was built by French executives will provide employment opportunity
to 3500 peoples of Trnava.
Government of East Europe will help the people in financing different investments, also offers
incentives to the workers and will charge tax on employee wages at a low rate.
It will also provide employment opportunities in manufacturing sector of Central Europe
(Waddell, 2017).
The new plant in Trnava will help in reducing the unemployment from 135 to 5%. It will also
provide many benefits to the society.
Technological factor-The technology in auto-mobile industry of Eastern Europe is
maturing in many ways. The Eastern Europe is finding new ways for reducing CO2 imitations.
The Car Manufactures in Eastern Europe are developing innovative batteries so that the
reduction in speed battery loss can be minimize in auto-mobile itself (Doh, Luthans and Slocum,
2016). The car manufacturing companies in Eastern Europe are more focused on producing
environmentally friendly auto-mobile motors. Many developers in Eastern Europe are
manufacturing vehicles which alternate on different fuel systems. There is positive impact of
technology on Eastern Europe after the involvement of software and semiconductors in auto-
mobile industry, the Car manufacturer has increase there sales by producing Cars which reduce
the CO2 imitations. The leads towards increase in market share of auto-mobile industry in
Eastern Europe.
Economical factor- There is growing criticism towards the environmental pollution in
Eastern Europe created by vehicles (Taneja, Sewell and Odom, 2015). The Car manufacture in
Eastern Europe are now discovering the ways through which they can lower air pollution created
by automotive vehicles. There is positive impact on Car industries of Eastern Europe like
Toyota. Toyota get succeed in developing the environmental friendly cars. Toyota has developed
its marketing strategy through producing petrol-electric hybrid monitoring cars. This leads

towards the customer satisfaction and sale of Toyota Cars got increased and this eventually
helpful in leading Company towards the profitability.
Legal factor- There is more legal compliance measures is being add on to Car
manufacturing companies in Eastern Europe to increase the passenger safety. The Car
manufacture is now liable to manufacturer the cars which drives the customer safety. There is
product safety rules are applicable on car manufactures of Eastern Europe (Hamilton and
Webster, 2018). The positive impact of this legal factors is that this leads to increase the
manufacturing of cars. Eventually, Car manufacturer business is being expand through this legal
polices and this leads towards increase in the profits margins of Car manufactures of Eastern
Europe.
b) Porter Five Forces of Eastern European Car Manufacturing
The model of Porter's Five Forces analyses and identifies those five competitive forces
which shape an industry (Zeng, 2015). It helps in determination of the industry's weaknesses and
strengths. Below explored is the usage of Porter five forces of Car Production Surges in Eastern
Europe: Although the Porter's five forces analysis helps in evaluating the various and major
factors effecting the industry and business in whole. The economy can focus on the major areas
by using the analysis and step towards the betterment of the countries industries. But there are
certain limitations of this analysis which are like there is no internal evaluation of the problems
in the company. As there are many internal factors too which can effects the functioning of the
companies instead of external factors. The social factor is not being considered in this analysis
because the consumer behaviour is highly dependent on the social factors like type of
people ,there standard of living , there level of income and expenditure criteria. The political
factors also effects the sale of the commodity in the respective market , this aspect is also not
discussed in the Porter's five forces (.Baller, Dutta and Lanvin, 2016). The model is so designed
that it only can be applied to simple market structures and not the complex one's. Also the non
market forces of the markets are just being ignored and there is no description in the model
whereas there are many other non market forces like government policies, environment changes
etc.
Porter's five forces analysis determines that why there is difference in attainment of
profitability by different companies even in the same type of industries. It is widely used to

understand the companies big structure and the corporate strategies. The model also helps in
understanding the competition between the companies regarding demand and supply of product
and consumers behaviour (Adekola, A. and Sergi, B.S., 2016). The Porter's five model includes
the study of five factors which effects the industry and companies in the industry are-competition
in the industry, potential of New entrants into an industry, power of suppliers, power of
customers and threat of substitutes.
With the flooding of the car makers in the auto mobile market of Europe there is a
widely increase in the supply of the cars in the market, and with constant or the stable demand
there is the problem of decreasing rate of cars in the market as the sellers are more and buyers
are less . The buyers have many options regarding the purchase of the cars. Thus the people in
Europe became the next key factor of decrease in price of cars there. The car buyers in Europe
have many options in purchasing the car therefore they bargain for the lowest price which they
can afford and purchase at very low prices than before. As the prices of gas became high people
shifted from big or S.U.V's cars to the smaller cars and lower models.
Industry Competition: The competition for the car making industry of the eastern Europe
is large but it still holds a competitive advantage within the industry. Companies such as Ferrari,
Lamborghini, Bentley are having their reputation all over the globe yet the find it hard to sell
their cars in the global market (Kasemsap, 2018). It is because of the competitors present in the
countries of United States, India and Japan. Due to globalization, these competitors have started
selling their products and services in east Europe and it has lowered down its car makers selling
of products and services in not only the Europe but thought the world. The major competition of
east Europe car-makers is Toyota, Suzuki, and Tata. Competition in the industry highly effects
the demand of the products in the industry. The larger the number of competitors in the industry
of the same type of product the lesser the companies' sale of product. There is a close relation
between competitors and the sale of the company. Here in our case in Europe there is a high
competition in the auto mobile industries which influence the manufacturers in the countries.
After the communism in 1989 there came many car manufacturers in the country to acquire and
to built new factories in countries like Slovakia, Poland , Hungary and Romania.
Threat of Substitutes: The threat of substitutes is another major threat faced by the car
maker organizations across the eastern Europe. Its competitors and new entrants have started
using the same techniques and engines which the European car makers use. It has made it

difficult for the companies to sell their cars. The substitutes' cars and the engines are services set
into them are copied by the new entrants and the competitors residing outside the European
market such as General Motors and Suzuki. It makes it difficult for the organizations across the
eastern Europe to sell its products and services and ensure market growth and profitability. In
order to deal with this, the car-makers across Europe are making use of promotion techniques to
deal with such competition (Salvatore, 2015). They are advertising their cars more on a global
level and are comprehending what strategies their competitors are using in order to reach growth
and profitability aspects. Threat of substitutes being the major reason in the Europe. The market
was full of many car makers who offered the various cars and there different models at the same
time making it difficult for the local business. Although government intervened and make a
champion for the local business and help reducing the cost of the cars by relaxing in the taxes.
The labour here is costly and later became cheaper so helped the car makers in the process of
there car making. There were substitutes of cars like compact body, stylish and economical cars
at low prices by the car makers in Europe.
Potential of New Entrants into an industry : Power of new entrants are threat for the
companies who deal with the specific industry or sector. Potential threats in car manufacturer
company is rarely present. The reason behind this is that it requires huge amount for the
investment which sometimes not handles by the new companies. In East Europe the threat of
new entrants are comparatively low (Kolk, 2016). In other words, threat level in car
manufacturing company is medium given concentration of industry clusters in specific strategic
centres. Besides, existing competitors are very powerful and well established to maintained in
the market. On the other hand, it will also very helpful to generate revenue for itself. As per the
data foreign firms are constant kl increasing the carbon footprint in within the industry. Besides,
existing competitors are high where new company cannot take risk to open their own. Such as
General Motors and Suzuki. The new entrants in Europe creates the break down of many
industries in the countries. As there are many manufactures there is flood auto mobile companies
in Europe . Also the entrance of foreign companies bring with them the new techniques which
ruin the local business at very high scale. People from many part of the country have leave their
business and have immense amount of loss in this business.
Power of suppliers: the force of suppliers can drive up the prices of the raw material and
products. Generally the power of suppliers depends upon the number of suppliers or the number

of buyers. In car manufacturing company the power of suppliers are also medium because of
high power of buyers. Due to limited demand or by the powerfully buyers, suppliers has to sell
their raw material in the productive quality (Lasserre, 2017). Suppliers are plays the most
important role in order to build the effective result and growth in order to meet out the last factor
affecting result and growth. Some major companies have their own manufacturing unit there they
product raw material by their own way. Suppliers are the most powerful element that affect the
overall business and effective goals in order to sustained in the market and growth. The supplies
of auto mobiles in Europe in the year 2010 was 3.4 million cars per year, so there was a direct
jump of 33 percent of the manufacturing of cars in the year 2005. The sudden flow of the cars in
the auto-mobile market made the prices of the cars low and increasing competition made it even
more difficult to continue the business in Europe. Also the new suppliers were so powerful
acquired a large customer base.
Powers of customer: customer are the king of the market who always set on the priority
basis in terms of business. Customers are the most effective and long lasting developing growth
in order to meet out the best developing and potential results and growth. Customers are the most
driven factor that affect directly or in direct manner. In car manufacturer firm East Europe
having a huge demand of cars with new equipments and functions. It requires the best productive
results that helps to full fill the customer needs and wants. In other words, in car manufacturing
Customer demand high and they want quality and luxurious features in the car. Accordingly, it
is the responsibility of the car company to create model as per the demand of the customer needs
and wants. It helps to determine the best and developing result in order to satisfy the client needs
and wants (Laudon and Traver, 2016). On the same side, power of customers are medium they
ready to invest huge amount on the cars but they only want some new and different. Cars are the
passion and symbol of class standards, the car manufacturing companies always focused on the
product or customer demand. Besides, they always target to middle or upper class people. In
other words it helps to full fill the long lasting range products in order to meet out the best
outcomes and growth results in order to full fill the growth. In order to full fill the customer
needs, company or industry should need to focus on new trend in the market. Auto components
suppliers are focused on entering new vehicle segments and manufacturing new products with
higher margin

CONCLUSION
From the above study it has been summarized that the car production in Eastern Europe has been
increased. It has been because of the various political and economic reasons. The auto-mobile
industry has been growing because of the political stability in the environment. Eastern Europe
has also been engaged in making cheap cars. The production has been increasing as the European
Union has been involved in providing incentives and job opportunities to huge proportion of
people. This allows people to settle over there, that had led to increase in the production of cars

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