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Global Environment

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Added on  2021-01-02

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The global automotive sector is analysed as multi billion industry with several international brands competing for market share.After foundation in 19th century, this industry has grown tobecomean significant part of world economy in terms of revenues. Afterthe communism, internal automotive manufacturers rushed for acquiring local car producers and created their own factories in countries like Slovakia, Poland and Czech republic.From last several years, these manufacturing organizations have doubled their production to more than a million cars (Berner and Berner, 2012).

Global Environment

   Added on 2021-01-02

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Global Environment
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Global environment can regarded as surroundings in different overseas nations, with thefactors exogenous to the home environment of enterprises, influencing decision making orutilization of resources and capabilities. With the rapid development in Automotive sector,managing environments are becoming more diverse and multifaceted. Global firms are thosewhich regulate business and compete in more than one country. Business environment of theseorganizations are considered as set of forces and conditions external from the boundaries oforganization that influence the way it operates and shapes its behaviour. Auto-mobile industry is analysed as one of the fastest growing sector across countrieswhich has provided major growth to economy. Present report is based on analysis of globalautomotive industry by using PESTLE and porter's five forces model. Further, facts and figuresare stated from given case study to determine the growth of manufacturing companies in Auto-mobile industry.The global automotive sector is analysed as multi billion industry with severalinternational brands competing for market share. After foundation in 19th century, this industryhas grown to become an significant part of world economy in terms of revenues. After thecommunism, internal automotive manufacturers companies rushed for acquiring local carproducers and created their own factories in countries like Slovakia, Poland and Czech republic.From last several years, these manufacturing organizations have doubled their production tomore than a million cars (Berner and Berner, 2012). In Easter Europe, Car manufacturingcompanies like Toyota, General Motors, Peugeot, Hyundai and Suzuki etc. have also announcedtheir plans for continuous expansion of manufacturing plants in the region. On the other hand, due to large size of global automotive sector, its decisions, sales,expansion plans, growth and revenues are highly influenced by external factors. In globalbusiness environment, recent financial crisis had hit this sector very hard (Cames and Helmers,2013).Apart from production of vehicles across countries, this industry has also involved inmarketing and sales of automotive. In recent years, European and Asian market have proved veryprofitable for international automotive brands. European union remains 2nd largest with 29% oftotal car production with 17 million cars and china has specifically grown to about 4.4 % whichmakes them the world's big market for vehicles and has produced 29% of all cars globally.1
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In present scenario, technology and continuous innovation have become a basis ofdifferentiation for automotive manufacturing companies. Apart from it, production of cars inEurope is on the way to exceed the production to approximate 2.7 million vehicles (Smmt newsUK manufacturing, 2017). These car manufacturers from Asia, US and Europe have made alarge investment in local factories for increasing innovation to meet customers requirements. Inorder to understand and examine the external environment of automobile industry of EU,PESTEL analysis has been done.Political environment plays a significant role and provide direct influence on production,sales and profitability of Automotive industry. Government in major developed and developingeconomies are providing their major focus on production low emission vehicles. Moreover, taxeson luxury and commercial vehicles have increased higher (Grant, 2016). World's largesteconomies, EU and UK are offering government subsidies for manufacturing of low emissionvehicles. Demand of environmental friendly cars have grown globally due to increase inrestrictions of Authorities. As such, government laws and restrictions highly influenced the production capabilitiesand sales revenues of international business enterprise. Continuous changing government law aswell political restrictions have cause both favourable and unfavourable fluctuations. However,these factors are generally outside the control of international brands (Pucciarelli and Kaplan,2016). Their influence can considered from the fact that car manufacturers in internationalmarket have shifted their manufacturing plants in countries where the wage regulations arelenient. For example: Volkswagen manufactures and assembles its Touareg SUV and Big Q7 ofits Audi Affiliate in the Slovakia. Porsche assembles its luxuries cars in the factory nearBratislava and then ships them to Germany for finishing. These government laws and politicalrestrictions highly influence business decision and operations of Automotive companies. 2
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Illustration 11: Pestle AnalysisSource 1: Scanning the Environment: PESTEL Analysis, (2016)These forces also have their specific importance in context of the automotive industry.This sector was continuously hit hard by the recent economic crisis. Decline in economicconditions cause fall in sales of automotive organization and their production. The requirementfor luxury and high prices cars is also influenced due to poor economic conditions of nations.Moreover, taxation policy of government are also different for car makers in every country(Frynas and Mellahi, 2015). Further, in developed countries tax rates have been reduced to boostthe sales of Automotive sector. As per the given case, along with other countries of EasternEurope in EU, cars from the region will enter the western cost without tax or other duties,significantly erasing boundaries for Automotive industry (Pratap, 2016). In addition, developedmarkets consider higher sales because the purchasing power is high as compared to developingcountries. Thus, the size of economy and global economic conditions have a major influence onprofitability of automotive industry in various markets. This Automotive industry is highly influenced by socio cultural factors which involvesvalues, perception, culture and other variables. Decisions of customers and brands are highlyinfluenced due to continuous changing economic trends and individual's preference. Automotivebrands in Global business environment needs to analyse and adopt these forces. Perception of3
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