Strategic Management in Automotive Industry

This document provides an overview of strategic management in the automotive industry, including its history, the application of Porter's Five Forces analysis, and the decision to import cars instead of manufacturing in Australia. It discusses the stages of strategic management and the role of external analysis in assessing the industry. The document also includes a PEST analysis of Australia and concludes with the reasons behind the decision to import cars and the impact of low import tariffs.

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Table of Contents
Introduction................................................................................................................................2
Response to Section 1:...........................................................................................................2
Response to Section 2:...........................................................................................................4
Response to section 3:............................................................................................................5
Conclusion..................................................................................................................................6

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Introduction
The continuous state of designing, monitoring and assessing the strategies and
approaches of organizations for the purpose of aligning the aims and objectives is known as
strategic management (Ansoff et al. 2018). In management, the role of strategic management
is to formulate and execute the main objectives of organization with the association of the
resources and the analysis of external-internal environment. The stages of strategic
management includes establishing vision and mission of the organization, collecting and
assessing information, formulation of strategies, implementation of strategy and the last step
is execution and control. The purpose of the paper is to identify the history of automotive
industry and to assess the industry through Porter’s Five Forces and PEST framework. The
paper will also identify the aim of Australia in importing automobiles instead of adopting the
manufacturing process. The paper will be concluded by presenting a summary regarding the
functioning of automotive industry.
Response to Section 1:
The main purpose of the paper is to represent the information regarding world
automotive industry and assess the industry through the implication of external analysis. The
study will conduct a competitive analysis for the data regarding the new car motor vehicle
industry. The study will also represent the reasons behind the strategy of importing cars
rather than manufacturing in Australia. The study will comprehensively discuss about the
external environment that the automotive industry experiences.
Automotive industry includes extensive range of organizations and companies
focussed on development, design, manufacturing, selling and marketing the motor vehicles.
In terms of revenue inflow, automotive industry is one of the largest in the world. The

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origination of words came from the Latin and Greek influence, as the word motivus came
from ‘of motion’ and the word auto came from ‘self’, thereby indicating the self-powered
vehicles. The term automotive first came into application during the year 1898 for referring
automobiles. The industry was initiated during 1860s in the association of manufacturers in
hundreds, who were involved in pioneering horseless carriage. The industry was led by
United States for many years before the effects from Great Depression. The history of
automotive industry may indicate the origin from steam powered vehicles, but the
commencement of the industry was marked by the growth and development of gasoline
engine during 1860s and 1870s from Germany and France. Along with the French and
German manufacturers, American, Italian and British manufacturers joined the industry by
20th century (Brintrup, Ledwoch and Barros 2016). In the past, small shops comprised the
automotive industry, where they attempted the manufacturing of handmade cars. Almost all
the businesses experienced decline except few of them, who managed to survive in the age of
the large-scale production. There were three categories in automotive industry, bicycle
manufacturers like Morris of Great Britain and Opel of Germany. Another category includes
machinery manufacturers like Daimler in Germany and the third category included horse-
drawn vehicles builders like Studebaker of United States. The contribution to the
technological field from automotive industry was an indication of mass production. Mass
production is considered as the procedure of combining standardization, precision,
synchronization, continuity and interchangeability (Schulze, Paul MacDuffie and Täube
2015). The innovation of the mass production was carried out by America’s innovation
practices. The concept of the origination of large-scale automotive organizations and mass
productions were completely independent, but reflect the link through the inclusion of mass
production in automotive industry. Both the practices and establishment were correlated
through the influence on expansion. The next phase of automotive industry originated the

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concept of assembly line for ensuring the quality and standardization process of
manufacturing automobiles.
Response to Section 2:
Porter’s Five Forces Model for the new car motor vehicle industry of Australia is given
below:
 Barriers to entry: The barriers of entry of the new manufacturers is high in automotive
industry due to the high investment criteria and the requirement for strong distribution
network. The barriers to entry in Australia is high due to the importing decisions. The
Australian automotive industry experiences pressure from the exporters of cars. The
low tax rates of exporting cars to Australia provide provision to the international
automobile manufacturers and the new entrants’ experiences challenges (Lasserre
2017).
 Industry Rivalry: The industry rivalry is high. The car or automotive industry in
Australia is reflecting developmental trends. The main hub for manufacturing process
of car is Melbourne and Adelaide city. The main car manufacturers of Australia are
Ford, Toyota, Mitsubishi and Holden. The country majorly exports from international
market, but local companies also faces competition from each other (Noe et al. 2017).
 Threat to substitutes: The threat to substitute is high in car industry. The substitute of
cars includes, train, plane, bicycle and motorbike. Public transport is another
substitute for car industry. The industry also experiences threat from increasing
popularity of cab services (Nieuwenhuis and Wells 2015).
 Bargaining power of buyers: The bargaining power of buyers is moderate. The easy
availability of information and options in the market as well as the import practices in
car industry results in the stimulation of bargaining power of population in Australia.

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 Bargaining power of supplier: The bargaining power of supplier is high as the
suppliers’ sells parts and equipment to multiple manufacturer (Grant 2016).
PEST analysis of Australia:
 Political State: The political environment of Australia is stable. However, the country
is often criticized for deportation and immigration laws.
 Economic Climate: Australia holds the 13th position in the world in terms of economic
state. The economy of Australia grew by 2 percent in the year 2017 (Tesfaghiorghis
and Altman 2018).
 Socio-cultural aspects: The country have reflects diverse population with increasing
rate of immigrants. The population of Australia is 25 million as of 2018.
 Technological aspect: The country is known for its innovative practices through the
investment in technological infrastructure. In 2019, the investment in technology is
anticipated to reach 65 billion dollars.
Response to section 3:
Australia has always been in the top most countries for importing goods. They are
also practice of importing cars from international automobile manufacturers. The drivers for
increasing rate of imported brands is, the increasing income with higher concentration on
employment growth and education (Beer 2018). Another driver is the increase diversity in the
country leads to varying level of preferences, which causes high demand for international
brands (Clibborn, Lansbury and Wright 2016). With the declining sales and demand, the
multinational companies in Australia like Toyota, Holden Ford and Mitsubishi have
announced the end of manufacturing era in Australia. The main reason identified for
importing cars rather than manufacturing domestically is the decreasing rate of tax. The car
industry explained that it invested around three dollars per one dollar of the taxpayer funds.

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The import tariffs of Australia have transformed from low rates to zero after a certain period,
because of which the country was flooded with international car manufacturing brands, that
were either affordable or with higher features.
Conclusion
Therefore, it can be concluded from the paper that the automotive industry globally
have evolved majorly due to the incorporation of innovation and technological advancement.
The industry majorly contribute to the global economy. In spite of an attracting business
environment in Australia, the country have stopped manufacturing cars in their home country.
The multinational manufacturers of Australia have stopped manufacturing cars due to the
increasing rate of international car manufacturers in Australia. The reason behind this
decision is the low to zero import tariff rates.

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References:
Ansoff, H.I., Kipley, D., Lewis, A.O., Helm-Stevens, R. and Ansoff, R., 2018. Implanting
strategic management. Springer.
Beer, A., 2018. The closure of the Australian car manufacturing industry: redundancy, policy
and community impacts. Australian geographer, 49(3), pp.419-438.
Brintrup, A., Ledwoch, A. and Barros, J., 2016. Topological robustness of the global
automotive industry. Logistics Research, 9(1), p.1.
Clibborn, S., Lansbury, R.D. and Wright, C.F., 2016. Who killed the Australian automotive
industry: The employers, government or trade unions?. Economic Papers: A journal of
applied economics and policy, 35(1), pp.2-15.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley &
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Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Nieuwenhuis, P. and Wells, P. eds., 2015. The global automotive industry. John Wiley &
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Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.

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Schulze, A., Paul MacDuffie, J. and Täube, F.A., 2015. Introduction: knowledge generation
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