Analysis of Automotive Industry's Contribution and Impact

The report begins by discussing the importance of the automotive industry in the global market, highlighting its significant contribution to the economies of various countries. It then delves into the external environmental factors that have affected the industry's performance, using PESTEL analysis. The Porter five forces framework is also applied to identify the different forces that impact the industry. Additionally, the report explores the automotive industry's role in Eastern Europe and its adverse impacts. The information is sourced from various books, journals, online articles, and websites.

THE GLOBAL BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
a) Assessing environment of the Global Auto mobile industry using PESTEL analysis...........3
b) Assessing the environment of Global Auto mobile industry using Porter’s Five Forces
analysis........................................................................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
European auto mobile industry is one of the largest industries in the world. The turnover
generated by this automotive sector represents 6.8% of EU GDP. The present report is giving
brief discussion about Auto mobile industry of eastern Europe. It is clearly depicting the auto
mobile industry which has ripple effects throughout the economy, supporting a vast supply chain
and generating an array of business services. In the same series it is depicting environment of
global Auto mobile industry.
The European auto industry is a global player which is delivering quality service and
products around the world. Present report will focus on “Car Production Surges in Eastern
Europe” and its impact on the auto mobile industry. It will discuss about external factors, which
affects them by studying PESTLE analysis and also evaluates competitive analysis by
implementing Porter’s Five Forces model.
TASK
a) Assessing environment of the Global Auto mobile industry using PESTEL analysis
PESTLE analysis is a process, which is used to analyse the external environmental
factors, which can affect the entire organization to a large extent. Factors that are included in this
analysis include political, economic, social culture, technological, environmental and legal
factors respectively (PESTEL Analysis for Automobile Industry in Europe, 2018).
Political Factors This includes the political factors related to governmental policies
for auto mobile industry. Some political factors, which can affect the
Eastern European auto mobile industry are as follows:
 There are many rules and regulations, which can influence
this industry. For example, during economic and financial
crisis, there were different government norms that helped this
industry.
 There are different incentive schemes, which were also
launched by the government (Belton, 2017).
 Implications of different government foreign policies and
taxes also play a crucial role in auto mobile industry.
 Government subsidies are other political factors which have

to manage by this industry to work effectively in the market.
 The markets like EU and UK are providing government
subsidy for the low emission vehicles which can help them in
improving their services.
 The import and export laws that vary across nations can also
be a headache for auto makers in case of the nations where
import laws are stiff (Belton, 2017).
Economic Factors There are various factors, which are included in this economic factor
that can affect this industry such as,
 The main factor, which affects the auto mobile industry, is
fluctuation in the economy, for example financial crisis.
 High gas prices in the West have also encouraged consumers
to start shifting from big cars and S.U.V.'s to compact cars
that have become a specialty in Eastern Europe.
 Inflation rate is also a factor, which affects the entire auto
mobile industry (Brinkman, Navarro and Harper, 2014).
 Excess car production increases marketing revenue as well as
designing new products.
 The size of the economy and the economic conditions
globally, have a major impact on the profitability of the auto
industry in various markets.
Social Culture Factors These factors include customers taste and preferences in selecting
vehicles for them such as,
 There is a huge change in buying behavior of the consumers,
for example, customers prefer more luxurious cars as
compared to basic one.
 Sudden change in the buying pattern of their customers has
also affected their production rate (Checchinato and Hu,
2018).
 Different laws and regulations related to the government are

also impacting them.
 Customers concern related to high fuel efficiency and
reduced emission has also affected their business.
 Social trends also keep changing continuously affecting the
popularity of brands and models (Damijan, Kostevc and
Rojec, 2018).
Technological Factors These are those factors which have a huge impact on the auto mobile
industry as it is very important for them to update their system with
the latest tools and technologies, which can help them to increase
their business.
To deal with these situations, they have implemented different
strategies in their industry such as,
 The auto mobile industry in Eastern Europe is producing
vehicles which are energy efficient by using modern
technologies.
 They are also ensuring safety parameters of the vehicle,
which they are manufacturing for their customers. This will
help them to increase their production rate (Frynas and
Mellahi, 2015).
 Introducing vehicles with the latest technology has huge
positive impact on the overall performance of the industry.
 There is a huge increase in the purchasing of fuel efficient
and high mileage factors which attracts customers.
Environmental Factors These factors are those which are related to safety of the
environment. For this they have applied various steps, for example,
 Eastern European auto mobile industry has enhanced
awareness related to global warming, green house effect etc.
 They have introduced variety of different vehicles in their
production system such as, hybrid cars, fuel cells cars and
environmental friendly cars, which helped them to attract

more customers (PESTEL Analysis for Automobile Industry
in Europe, 2018).
 Due to the implementation of strict application of EURO
norms in curbing pollution in few countries has also affected
this industry.
 The pollution tests have grown stricter and the vehicles
passing these tests only are allowed.
Legal Factors One of the most important legal factors which is affecting the auto
mobile industry is the restrictions and laws that are aimed at curbing
pollution. This has also affected the overall performance of industry.
 Vehicles selling in the international market are subject to
laws related to product quality and safety.
 The vehicles being exported overseas have to pass strict
emission controls.
 There are various laws related to the customers safety which
has to be strictly followed by the auto mobile industry (Top
Legal Issues Facing the Automotive Industry in 2017, 2017).
 The pollution law has been implemented very strictly.
Importance of PESTLE analysis for auto mobile industry in Eastern Europe
There is a huge importance of this process in the auto mobile industry of Eastern Europe
as it will help to study and evaluate the external factors, which is very important for them to
grow in the industry and in expanding their business (Hamilton and Webster, 2015). For auto
mobile industry it has a huge significance as with the help of this analysis it becomes easier for
them provide the best services to their customers in the market and make them satisfied.
b) Assessing the environment of Global Auto mobile industry using Porter’s Five Forces analysis
It is also considered as the ways for evaluating attractiveness of any specific industry. It
is a presence of forces which is considered as determinants of profitability of industry.
The five forces are as follows:
Threat of new entrants: In the context of auto-mobile industry, there is presence of
huge barriers for entering in this industry, as it make threat of new entrants as low aspect. There

are various factors for tracking all threats, which consists of entering those barriers like
requirements of upfront capital, legislation and government policy, brand equity and capability
for distributing product (Kew and Stredwick, 2017).
There are various multi-national competitors, which provide advantages in context of
scope and economies of scale, as it replicates difficulty for any new entrants for providing
pricing that is very competitive in nature.
The issue of safety, durability and reliability is referred as salient features due to base of
buyers according to their past performance with the specific problems. With reference to Eastern
Europe, it is not manufacturing only cheap small cars but also working on the quality of their
products. Volkswagen is assembling Touareg S.U.V and Audi big Q7 is directly affiliated with
Slovakia (Kew and Stredwick, 2017).
Therefore, it could be justified that there is absence of threat for entering new auto mobile
manufacturers on global or domestic scale in Eastern Europe. On this basis, it had been
articulated that there is a need of significant capital, expertise in technical and managerial aspects
for absorbing market acceptance, which would be generating sales and revenue efficiently.
Threat of substitute products: In Eastern Europe, threat of substitute is existing to large
extent. The prices of fuel had been raised for pushing various drivers for implicating public
transportation. There is a presence of different vehicle owners who are convinced for using their
personal vehicle but it is affected by the raise in prices of fuel; if this specific trend is followed
continuously, then the manufacturers of auto mobile industry would be not be capable for giving
solution which are cost efficient, so it will directly reflect increment of threat (Muža, 2014). In
last year, Volkswagen, Fiat, Suzuki, general Motors, Kia and Toyota had plans for expansion or
building specific assembly plant in similar region. So for this purpose in Eastern Europe, market
should be closed and flexible for any specific and certain reorganization.
The local auto makers were championed by local governments such as Dacia in Romania
and Skoda in Czech Republic. In same series, prices of gas were very high in the west have
motivated customers for shifting to those types of cars which are compact and is considered as
speciality in Eastern Europe.
Bargaining Power of Buyers or customers: In the context of power of specific buyers,
the capability of an individual consumer is to negotiate with prices, which extracts margin from
sellers. There is presence of very low cost for purpose of switching or it could be justified as

competition threat with reference to buyer. The end consumers do not have bargaining power
due to individuals who directly buy from manufacturer via distribution system which is
franchised (Pavlínek, 2018). This can impact the overall performances of the overall auto mobile
industry. The price had been directly influenced by individual consumers which provides proper
dealership but minor authorities had bee provided to manufacturers. There could be easily switch
on other auto dealers by customers along with little cost.
The bargaining power of buyer is high due to low switching cost and proper
differentiation of new designs because of possibilities of market tend and huge shares of buyer of
specific market with perspective of single auto maker to any other whose net impact is giving
outcome of high power of bargaining power. The volume of buyer is concentrated in appropriate
format. This industry if growing in huge aspect in eastern Europe. Usually it does not face any
shortage during process of operation. Basically rivals are not diversified but presence of product
differentiation which must give competitive edge because it is termed as key to success (Peng,
2016).
Bargaining Power of Supplier: In the context of auto-mobile industry, this force has a
huge impact on them. In this factor, supplier of the raw materials for the manufacturing of the
vehicles has power to manipulate the pricing of the products which they sell to their customers.
i.e., owner of the industry. This depends basically on how strong the position of the seller is in
the industry. Availability of the substitute can posed threat to the supplier in this industry.
Eastern European auto mobile industry does nor rely only on one supplier to buy their raw
materials. These buyers help them to supply parts, tires, components, electronics, etc.
The suppliers tend to gain profitability of industry at huge extent. There is presence of
very fewer substitutes because of qualitative products. The whole manufacturing industry of
automotive industry gives reliance on suppliers. In the context of competitive advantage it
provides products of unique service as in this specific industry, it is dominated by various new
business entity. The whole production line is totally dependent on suppliers. There is presence of
huge cost for switching, especially in eastern Europe (Perry-Kessaris, 2016). If there is
availability of substitute but it is very difficult for opting any substitute for purpose of assembly
line of different product which is dependent.
Threat of established rivals or competitive rivalry: This factors is related to the
present competition in the market which can affect the overall performance of the auto mobile

industry. This can help them to increase their business and improve their services and products in
order to compete with their competitors. Due to this factor, there are so many factors which has
been applied in the industry there are so many changes in the functioning of this auto mobile
industry as well. For example, they have invested more to introduce cars according to their
customers preferences and liking which can help them in staying strong in the competitive
environment. Customers are opting for more luxurious cars as compared to normal budget car
which has a huge impact on their manufacturing of vehicles (Wetherly, 2014).
The automotive industry is becoming too much intense on basis of industry to be
competitive in nature with two attributes such as price and non price as well. There is presence of
different companies in eastern Europe which gives huge incentives for attracting consumers for
buying their own and separate vehicles. Different organizations attained huge success in context
of scale and volume because of proper anticipation for becoming highest player with reference to
specific auto mobile industry. This specific industry is referred as mature which signifies fierce
competition and it would raise rivalry. The growth of automotive industry in eastern Europe in
flat which consist of huge number of competitors along with its market share. The players of this
industry in eastern Europe has capital leverage of huge extent (Facts about the Automobile
Industry, 2016). Its competitors has various benefits of cost leadership and its cost advantage is
refereed as paramount to such manufactures to remain competitive in nature.
Porter's Five Force Analysis
Threat of new entrants Moderate
Threat of substitute products Moderate
Bargaining Power of Buyers or customers High
Bargaining Power of Supplier Weak
Threat of established rivals High
CONCLUSION
From the above report it can be concluded that it is very important for the auto mobile
industry to understand their business to provide the best services and products according to the
customers needs and preferences. This reports explained about the external environmental factors

which has affected the overall performances of the auto mobile industry which is analysed by
applying PESTEL analysis which helped them to understand all the different factors, such as,
political, economic, social culture, etc. This report also discussed about different forces which
has a huge impact on auto mobile industry by analysing Porter five forces. Further it could be
summed up by analysing that Automotive industry had huge contribution in economy of eastern
Europe with its adverse impacts.

REFERENCES
Books and Journals
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. Macat
Library.
Brinkman, J., Navarro, I. and Harper, D., 2014. Unlocking the business environment. Routledge.
Checchinato, F. and Hu, L., 2018. THE ROLE OF DIGITAL PLATFORMS IN THE GLOBAL
BUSINESS ENVIRONMENT: THE CASE OF CHINA. In 2018 Global Marketing
Conference at Tokyo (pp. 707-707).
Damijan, J., Kostevc, Č. and Rojec, M., 2018. GLOBAL SUPPLY CHAINS AT WORK IN
CENTRAL AND EASTERN EUROPEAN COUNTRIES: IMPACT OF FOREIGN
DIRECT INVESTMENT ON EXPORT RESTRUCTURING AND PRODUCTIVITY
GROWTH 1.Economic and Business Review for Central and South-Eastern Europe.20(2).
pp.237-307.
Frynas, J. G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context. Kogan
Page Publishers.
Muža, H., 2014. Porter Generic Strategies (Doctoral dissertation, Ekonomski fakultet,
Sveučilište u Rijeci).
Pavlínek, P., 2018. Global production networks, foreign direct investment, and supplier linkages
in the integrated peripheries of the automotive industry.Economic Geography.94(2).
pp.141-165.
Peng, M. W., 2016. Global business. Cengage Learning.
Perry-Kessaris, A., 2016. Global Business, Local Law: the Indian legal system as a communal
resource in foreign investment relations. Routledge.
Wetherly, P., 2014. The business environment: themes and issues in a globalizing world. Oxford
University Press.
Online

Facts about the Automobile Industry. 2016. [Online]. Available through:
<https://www.acea.be/automobile-industry/facts-about-the-industry>
PESTEL Analysis for Automobile Industry in Europe. 2018. [Online]. Available through:
<https://www.bestessayservices.com/blog/pestel-analysis-for-automobile-industry-in-
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Top Legal Issues Facing the Automotive Industry in 2017. 2017. [Online]. Available through:
<https://www.autoindustrylawblog.com/2017/01/23/top-legal-issues-facing-automotive-
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