Holden Automobiles' Expansion into Hungary: A Business Environment Analysis

This report examines the feasibility of Holden Automobiles expanding into the Hungarian market. It analyzes the company's background, the Hungarian business environment, and the potential challenges and opportunities. The report utilizes PESTEL analysis to assess the macro environment and Porter's Five Forces to evaluate the competitive landscape. It concludes with recommendations for Holden Automobiles to navigate the Hungarian market effectively.

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REPORT BUSINESS

Table of Contents
INTRODUCTION................................................................................................................................2
INFORMATION ON HOLDEN AUTOMOBILES...................................................................................3
BUSINESS ENVIRONMENT FOR HOLDEN AUTOMOBILES IN HUNGARY..........................................5
PESTEL ANALYSIS FOR HOLDEN AUTOMOBILES IN HUNGARY (MACRO ENVIRONMENT ANALYSIS)
.........................................................................................................................................................9
PORTER’S FIVE FORCES ANALYSIS (COMPETITIVE ANALYSIS).......................................................11
CONCLUSION.................................................................................................................................13
REFERENCES...................................................................................................................................14
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INTRODUCTION
This assignment is based on the business organization and environment with regards to global
context. To establish the functioning of any company on other nation apart of which it
originally belongs to there are various types of challenges that occur during the entire
processing. This assignment is based on all those challenges the company has to face and the
other aspects of the business associated with the same. Any company working in the
marketplace and is planning to expand its business in other countries must initially conduct an
appropriate market research that helps to know about the current and future marketing
business environment. This assignment is based on the one of the Australian automobile
company “Holden Automobiles” whose expansion is being planned in Hungary.
This report initially discusses the entire overview of the chosen business organization that is
Holden Automobiles along with the allocated business environment. Also, the use of proper
analytic approach such as PESTEL will be carried out to understand external marketing
environment along with Porter's Five Forces Analysis to understand the competitive analysis of
the company using required data as well as examples. So, this assignment has all the significant
information that supports the report to feature all the relevant information regarding business
environment and organization in a global context.
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INFORMATION ON HOLDEN AUTOMOBILES
The Holden Automobile officially is called as General Motors Holden which is an Australian
company that deals in importing automobiles and also the company previously was an
automobile manufacturer. The Holden Automobiles is headquartered in Port Melbourne,
Victorian, Australia. The company was founded by James Alexander Holden and hence named
in his name; it is a private sector automobile company. Holden Automobiles was founded in
Adelaide, South Australia in the year 1856 that is long back from now (Thoms and Holden,
2016.). The product that the company offers to its customers is mainly automotive engines.
From the survey in the year 2017, it was analyzed that the total number of employees working
for the company is around 4000 in number. The company in 1908 became the subsidiary of
General Motors that is US based company and after it was named as General Motors-Holden
Ltd. in 2005 the company again was renamed as only General Motors Holden. The company
operates majorly in Australia but also in other countries such as Korea, Thailand, India, and
United States etc. (Rahman and Areni, 2014.). Holden Automobiles also distributed the
European Opel brand in Australia till the year 2012. The vehicles that were being built in
Australia till 2017 were manufactured in the Elizabeth that is located in South Australia.
The engines were manufactured in different part that is in Fishermans Bend plant in
Melbourne. But in the old times, the manufacturing and the assembly plants for the engines
and vehicles situated in almost all the main parts of Australia. Also since 1969 the company
Holden Automobiles has started the services of motorsports in Australia and doing a great job
in this sector as well (Fourie, 2016). The biggest achievement of the company was when it was
provided with $270 million lifelines by the Gillard Federal Government and the ministries of
Baillieu and Weatherill the company in return decided to introduce about $1 billion into
vehicles producing in Australia. Also, Holden Automobiles decided to sell its residual stock that
is locally manufactured of the variety of Commodore vehicles and models of GM that the
company has imported. Holden Automobiles also presented the badge engineered models in
the sharing partnership with Nissan, Suzuki, Chevrolet, Toyota etc.( White, 2015). The clients of
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the Holden Automobiles were extremely satisfied with the services that they were being
provided in terms of quality, services and other advanced features in the vehicles.
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BUSINESS ENVIRONMENT FOR HOLDEN AUTOMOBILES IN HUNGARY
Hungary is a part of Central Europe and is one of its countries that almost surround an area of
35,920 sq. mi. The largest city that is also the capital of Hungary is Budapest. Mainly Hungary is
known for its amazing food and Roman architecture as well as its industrial sector (Pina, 2014).
In past few years, it has been noted that the industrial sector in Hungary has developed
massively. The outputs obtained from the industrial sector and the value added evolution was
mainly noted parallel to flowing production abilities increment associated to big automobile
sector investment project along with this growing networks of the suppliers also have a major
contribution in developing a favourable data. The data evaluated by the Hungarian Central
Statistical Office KSH, the gross value contributed by the industrial sector is around 24.5 percent
in the year 2011 and by the year 2015, it rose to around 26.7 percent. The highest growth rate
was noted in the year 2014 and 2015 as during this period the growth rate improved to around
1.2 percent (Kew and Stredwick, 2017).
FIGURE 1: GRAPH REPRESENTING GROWTH IN INDUSTRIAL SECTOR IN HUNGARY
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SOURCE: {http://www.kormany.hu/download/4/5a/e0000/Hungarian
%20Outlook_Hungarian%20industrial%20sector%20as%20a%20major%20growth
%20engine.pdf}
This development in the GDP of Hungary is major possible due to automobile industry which
has contributed a large portion in the GDP of the country. General Motors in the year 1990 has
invested an amount of 250 million in order to build an assembly plant in Hungary (Pavlínek,
2017). Such a huge automobile business in Hungary is the main reason that encourages the
Holden Automobile to start up its business in Hungary as well.
FIGURE 2: AUTOMOTIVE INDUSTRY IN HUNGARY
SOURCE: {http://country.eiu.com/article.aspx?
articleid=274589611&Country=Hungary&topic=Economy}
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According to the reports of The International Organization of Motor Vehicle that the roads
ahead for the automobile industry in Hungary are very positive as Slovakia, Poland, Hungary are
in top 25 vehicle manufacturing place in 2015. Total production of cars in these nations have
grown to around 3,5 million in 2017 making this region among the top 2nd automobile hub in
Europe (Rechnitzer, et al. 2017).
BARRIERS IN MARKETING FOR HOLDEN AUTOMOBILES: At the time of expansion in Hungary
Holden Automobile will have to face a lot of different types of barriers in the market segment of
Hungary. As there already big brands those are ruling the automobile market in Hungary like
Cespel, Mercedes, Audi Credo etc. (Beverland, et al. 2016). So to plan its expansion n Hungary
in a successful way Holden automobile along with its management and marketing team have to
develop many tactics that promote the company effectively in the new market and attracts the
customers to choose its services over the companies already settled in Hungary. The barriers
could be obtained from sources such as:
 DOMINATION: It is the state of being controlled or can say the monopoly presented within
the marketplace to prohibit the entry of new entrants in any specific industry.
 LAWS AND LEGISLATIONS: Different countries have their different policies, regulations and
legislation so there are many chances that there is a major difference in the laws of
Australia as compared to Hungary and so it can act as huge barrier in the process of
expansion. But if the management team of Holden automobiles plan every aspect in
accordance with the policies of Hungary it would be easy for them to cope with the
changes.
BUSINESS START-UP IN HUNGARY
The charges of the registration and the other expenses are around HUF 150,000 for the
organizations have restricted obligations and the shares of the private companies are also less.
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The management of Holden automobile must prepare themselves with the following
documents and information:
 A form of constitutional standard
 Declaration of the CEO of a company
 Certificates or the approvals of legal legislatures
 List of the members of the company
 Certificate of payment that must discuss the administration and the disclosure fees
(Karlícek, et al. 2016)
The ways that could be adopted in order to expand in the market of Hungary and start a new
business are through franchising, strategic partnership or direct entry by investment. The
management of the Holden automobiles is planning to enter in the market of Hungary using the
direct investment method as they find many advantages linked with doing the direct
investments, also there are few risks associated to it that must also be taken in concern at the
time of implementing new set up in Hungary.
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PESTEL ANALYSIS FOR HOLDEN AUTOMOBILES IN HUNGARY (MACRO
ENVIRONMENT ANALYSIS)
The analytic approach is the utilization of the method in order to break down any issues into
several factors that are needed to solve those issues. It is a type of formal evaluation (Krishnan,
2017). In order to use proper analytic approach here, PESTEL analysis will be carried out with
respect to Holden automobile to study the macro environment factor. The PESTEL analysis of
the Holden Automobile will be based on several factors that could influence its new set up in
Hungary those factors are Political, Economic, Social, Technological, Environmental and Legal.
This analysis is done using these 6 elements based on the market analysis that helps to
understand the market condition of any place and its suitability for the business. Here is the
PESTEL analysis for the Holden Automobiles:
POLITICAL FACTORS: Under the political factors are the taxes that have been applied by the
government of Hungary for the automobile industry and other SME that supports Holden
Automobiles to settle its business in a successful manner. The governmental bodies and the
recent ruling political parties in Hungary support in starting a new business to companies like
Holden Automobile by providing funds and investment to start their business.
ECONOMIC FACTORS: In the year 2008-2009 Hungary has suffered economic crisis that made
the country drop its monetary status by around 5-6 percent but later to a due increasing
growth of automobile industry the GDP of the country has a sudden increment by almost 3.5%
from 0.4% (Smus, et al. 2017). The economic growth of Hungary is based on the import
business majorly due to less taxation and duties on other services that indicates a positive sign
for the business of Holden Automobile in Hungary.
SOCIAL FACTORS: The societal factors play an important role in the growth and success of any
business within the marketplace. The social factors indicate that the finical status of the people
of Hungary and their lifestyle is high that will support the business of Holden Automobiles in
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selling there vehicles in huge number as the people of Hungary believes in trying new. By
keeping the preferences and choices of customers in mind Holden automobiles can easily
flourish its business and there more likely to have a positive response from the people.
TECHNOLOGICAL FACTORS: Technological elements have direct stress on the functioning of the
company. Technology plays an important role in the automobile industry as it was noted that
Hungary spends around 1.5% of the total amount from its GDP in the research process (Nicu, et
al. 2014). This signifies that Hungary is technologically sound and the citizens of that nation are
interested in spending on the technologically updated mechanism. If Holden Automobile
spends more on making its vehicles technologically better it will help them to sustain in the
market of Hungary.
ENVIRONMENTAL FACTORS: Environmental factor majorly impact the automobile business the
government of Hungary has strict vehicles rules that permit low pollutants vehicles that
generate less fuel so as to safeguard the environment of the country. The vehicles after being
manufactured have to pass through pollution test so the management of Hungary must keep in
mind the environmental factors that are associated with Hungary so that its vehicles are widely
accepted.
LEGAL FACTORS: Different countries have different legal patterns that are made by the
governmental bodies so that discipline is maintained in the working of each sector. These
regulations are regulated to ensure the well-being of the nation and the people residing there.
So to expand its business in Hungary there is some legislation that comes under legal factors
that must be concerned by the management of the Holden automobiles like rules associated
with the safety of people, management of quality products, less fuel emitting vehicles,
submitting taxes timely etc.
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PORTER’S FIVE FORCES ANALYSIS (COMPETITIVE ANALYSIS)
The Porter’s Five Forces analysis is conducted in order to evaluate the completion within the
marketplace so that it could help in overcoming the barriers and the risk those are found by the
management of the Holden Automobiles so that it could support them in implementing their
business in Hungary with the expected success rates. The Porter’s Five Forces analyses for the
Holden Automobiles are:
BARGAINING POWER OF SUPPLIERS: the bargaining power of suppliers in case of the
automobile industry is Hungary is low as the country is the hub of the automotive sectors so
there are many suppliers available to provide raw materials and other and also it is easy to
import materials due to low duties in Hungarian countries (Rothaermel, 2015). That leaves the
owners with many options resulting in less bargaining power of suppliers.
BARGAINING POWER OF BUYERS: the bargaining power of buyers is high as there are many big
automobile companies those are dealing with the manufacturing and sells of vehicles like Audi,
Mercedes who produce exclusive cars. Hence the buyer is many options to choose from which
may impact the business of the Holden Automobile if they do not offer best options at
affordable prices.
THREAT OF SUBSTITUTES: The substitutes to the entire automobile industry is other ways of
transportation and in Hungary the lifestyle of the people suggest that they are much use to
adopt the roadways for even far way traveling's that minimize the threat of substitutes for the
Holden automobiles as the customers will tend to choose cars and other vehicles over another
mode of travelling.
THREAT FROM NEW ENTRANTS: As Hungary is the hub of automobile industry many other
companies like Holden Automobile is planning to expand their business in this country. Also,
the cost of setting up the business is less due to governmental support and funding's that
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makes it easy for the new entrants to enter the business. Hence the threat of new entrants for
Holden Automobile is high (Grant, 2016).
THREAT FROM PRE-EXISTING COMPETITORS: The threat from pre-existing competitors is
medium in the case of the Holden Automobiles in Hungary as there are many companies who
offer vehicles but in high prices if the management of the Holden Automobiles plan the pricing
structure keeping in mind the costing done by its rival it will become easy for them to beat their
completion in the marketplace.
Thus, all the above-discussed factors conclude about the analytic approach that will support in
marketing analysis of Hungary and will provide relevant factors that will help the management
of the company to plan its expansion in Hungary accordingly.
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CONCLUSION
This assignment concludes with the business organization and the environment in context to
the global market. The discussion here is based on the expansion of the Holden automobile in
Hungary. The report evaluates the company overview of the Holden Automobile along with the
business environment in Hungary and its appropriateness for the Holden Automobile to set up
its business. This report analyzes the proper analytical approach using the PESTEL analysis and
Porter’s Five Forces to examine the market of Hungary for the automobile industry like Holden
Automobile.
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