Management: Strategic Analysis

Running head: MANAGEMENT
Management: Strategic Analysis
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1MANAGEMENT
1. Background of the study
Closure of manufacturing plant of Holden, a unit of the US automobile manufacturer
General Motors, marked the end of 100 years of history in the automobile manufacturing in
Australia. The company closed the plant on October 20, 2017 to move its manufacturing to other
cheaper locations (Packham 2017). Holden closed its plant after a year when Ford and Toyota
also closed and moved out from Australia resulting in loss of thousands of manufacturing jobs.
This is a big blow to the car manufacturing industry in Australia. Not only in terms of
employment, but also for the reason that Holden cars would have to be imported now. This
entails the imposition of import tariff, making the cars expensive for the Australians (Beer 2018).
The decision to close down a 100 year old car manufacturing industry came after decades of
subsidies provided by the Australian government, increasing value of Australian dollar, high
wages, rising cost of Australian labor, import barriers in the Asian countries and increasing
competition in the international industry (Ladd 2017). In this paper, the competitor analysis of
the industry will be conducted along with the situational analysis, that is, the political, economic,
social and technological effects of withdrawal of passenger motor vehicle manufacturing from
Australia.
2. Five forces model and competitor analysis explaining the industry
Porter’s five forces model will be used to analyze the competitive position of the
company as well as for the car manufacturing industry of Australia.

2MANAGEMENT
Figure 1: Porter's five forces model
(Source: Lüttgens and Diener 2016)
Threat of new entry: The Australian car manufacturing industry, or companies like Holden
faced the threat of new entrants from the international companies that export their cars to
Australia. Local manufacturers are not a big threat but the global players are a major threat to
this industry as they are producing the cars in locations with cheaper labor cost, while the labor
cost is high in Australia contributing in the higher price of the cars (Conlon and Perkins 2018).
Thus, this force is moderate.
Threat of substitution: The Australian consumers want fuel efficient small cars, which is an
initiative towards sustainability. The demand for sports utility vehicles are also higher compared
to the large passenger vehicles produced by Holden. The demand for foreign made small cars
and SUVs are high in Australia due to low interest rates in the country and increasing
discretionary income, followed by high quality fuel efficient cars at a competitive price provided