Environmental Analysis of the Global Auto-mobile Industry: A Report

This report provides an in-depth analysis of the global auto-mobile industry, examining its environment through PESTLE and Porter's Five Forces frameworks. The PESTLE analysis explores political, economic, social, technological, legal, and environmental factors influencing the industry, including government regulations, economic conditions, and technological advancements. The Porter's Five Forces model assesses the competitive landscape, evaluating the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and customers, and competitive rivalry. The report highlights challenges like high barriers to entry, the impact of economic conditions on sales, and the importance of customer satisfaction and competitive advantage. It concludes by summarizing the key issues faced by the industry, particularly the political challenges faced by car-making organizations in Europe, including the impact of Brexit. The report aims to provide a comprehensive overview of the industry's dynamics and strategic considerations.

THE GLOBAL BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
The environmental analysis of the global auto-mobile industry............................................1
Porters five force model on global auto-mobile industry.......................................................3
REFERENCES................................................................................................................................6

INTRODUCTION
The below report assesses the environment of the Global Auto-mobile industry. The
report makes use of PESTLE analysis which identifies the political, environmental, social,
technological, legal and economical challenges faced by the auto-mobile industry. It explores
various dimensions which explains the occurring challenges and how these challenges can be
overcome by the organisations. The other model which is used in the report in order to assess the
environment is porter's five forces analysis (Rothaermel, 2015). The model explains the various
threats and challenges faced by the organisations and how these challenges can be overcome in
order to achieve set growth and development.
The environmental analysis of the global auto-mobile industry.
The global auto-mobile industry is a multi million industry with several large brands
competing for market share (Abbott, 2015). Car production company is global Auto-mobile
industry. Below is shows the PESTEL analysis of the automotive industry that include the
political, economic, legal, technological, environmental and social factors are as follows:
Political factor
It is plays an important roles and have a direct impact on the profitability of the auto-
mobile industry. This may includes the government policies, rules and regulation, taxation.
Moreover, taxes on the luxury vehicles and fuel guzzler low emission vehicles. They are also
receiving higher government support for their low environmental impact. Such as the
government rules and regulations heavily affect to business and revenues of the vehicle brand.
The import rules and taxes very from country to country. There are so many factors are affect to
auto industry. For example: government rules and regulations are impact to the business of car
production surges in Europe. Like government make changes in their some policies and increase
tax rate. In that case company have to pay the extra tax on purchasing raw material and any other
products. That is gives very biggest impact on the auto-mobile industry.
Economic factor
Economic factor are also impact to the business and its growth. It is important in the
context of the automotive industry. This sector is hit hard by the recent economic crisis. For
example: the economic condition is not goods, at that sales of vehicles fall. The demand of
luxury or high priced vehicles is also affected poorly during poor economic conditions.
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Moreover, the taxes on the high priced vehicles are high in several markets. Economic condition
is good then sales of vehicles can remain high. The sales are also high in the developing
countries (Kumar and Maqbool, 2018). The size of the economy and the economic condition
globally have the major impact on the profitability of auto industry in various markets. Industries
are depends on the purchasing power of the customers. The economic factor is impact to car
production surgeon and also to global auto-mobile.
PESTLE ANALYSIS
 Political factors:- From the manufacturing of the auto mobiles for developing the
countries continues pressure from the government. For making the auto mobiles it is
much more affordable for the common man because of despite of increasing the cost of
the cars. Auto-mobiles sectors which has been big sources for the revenues of the
government. Across the world it has made so many difficulties for the manufacturer of
the auto mobiles for remaining the competitive globally. Form increasing the middle
class in the developing countries it comes with the results for demanding the auto mobiles
with the instability of the political factors and also the began of the hurdles of the
corruptions for the manufactures of the auto mobiles which has made the car
manufacturer. It is an open challenge and opportunity for the auto mobiles manufacturer
for making the globalisation results in the open access for making the place in the market
(Scheffel, 2016.).
 Economic factors:- it affected the economic conditions of the auto mobiles industry and
also the economic crisis in the past and adversely affected the sales of the auto mobiles in
developing countries. The sales of the auto mobiles in developed countries are the
stagnant for most of the people which is already own the auto mobiles innovations which
may boost the sales of the auto-mobiles industry.
 Social factors:- its important for considering the taste and preferences of the customers
because it may increases the sales and also make a positive image in the market. It
revolutionised the whole community and society because there are so many people which
is associated with the auto mobiles industry and also it modifies the products and services
according to the demand and wants of the customers(Gifford and Reisig, 2019).
 Technological factors:- There are so many stages which has been crossed by the auto
mobiles industry because it brings so many innovations and creative ideas for making and
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manufacturing the products. From awareness of the customers for technological factors it
expects the manufactures and latest accessories and features which has been included in
the vehicles.
 Legal factors:- For the safety of the auto mobiles is one of the most important part of it
because it concerns about all the laws which has been made by the government globally.
It is a global trend for imposing the different regulations, rules and quality of the
standards of the auto mobiles. There are so many laws which has been made for the
safety of the employees and customers and it is much more beneficial for both.
Sometimes it creates so many problems and difficulties which is related to the law for the
new auto mobiles industry in new countries.
 Environmental factor:- the sector of the auto mobile industry it concerned with the
culprits for damaging to the environment. From increasing the knowledge of the issues
which is related to environment it may concerned about the customers for making the
pollution free products and services which effects the environment of the auto mobiles
industry. As the results, When the cars are manufactured at that time it produces the
environmental or eco friendly products in the market share of the auto mobiles is very
less. Day by day the demand of the eco-friendlily products is raising and increasing in the
future(Agamirov and et.al., 2015).
Porters five force model on global auto-mobile industry
It is a very important model as it plays a vital role in evaluating the competitive position
of the company. This model helps in identifying the horizontal as well as vertical competition in
the market through its five forces. These five forces are discussed in detail below:
Threat of new entrants – the degree of threat of new entrants in the market affects the
power of a company. When it comes to global auto-mobile industry, threat of new entrants is
very low because of high barriers of entry. This in turn has created difficulty for new entrants
because of high cost as the companies of all around the globe would not be able to achieve
economies of scale by undertaking large scale production. Apart from the cost, high restrictions
from the government have even hindered the entrance of new firms. Government has laid down
strict rules and regulations regarding entrance of new firms which has increased the difficulties
of auto-mobile companies. But the most important reason behind low threat from new entrants is
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that high requirement of capital to start as well as run their business operations smoothly towards
the accomplishment of their objectives.
Threat of substitutes – threat from substitute products is very high in the global auto-
mobile industry because of easy availability of similar products as all the business firms provide
products with similar features (Rothaermel, 2015). Availability of similar products has created a
threat for the business firms because the customers can easily switch on the substitute products
of the rivalry firms as the switching cost is also very low. Furthermore, the product
differentiation in the auto-mobile industry is also very low, this has added up the threat of
business firms. Thus, easy availability of substitutes, low switching cost and less product
differentiation has created high threat for the business firms of the entire world dealing in auto-
mobile industry. Hence, this is a negative aspect for business firms as they have to constantly
bring innovation through high investment in research and development in order to prevent the
customers from shifting towards other brands.
Bargaining power of suppliers – bargaining power of suppliers in the global- auto-
mobile industry is very high because of limited number of suppliers in the market and their high
demand in the market. This has given the suppliers of auto-mobile industry a high power to
determine the price based on their choice. There is high competition in the auto-mobile industry
with large number of firms competing against each other and each firm requires the almost
similar kind of raw material and this in turn has created the difficulty for firms in auto-mobile
industry to acquire the raw material. This has given high power to suppliers to fix the prices and
change them as per the market demand (Burns and Dewhurst, 2016). Hence, it is a disadvantage
for business firms as they have minimum power to gain with the suppliers.
Bargaining power of customers: The bargaining power of customers is another major
issue which the auto-mobile industry is facing. It is important for the organisations to ensure that
their customers being provided with the right products and services in order to reduce their
bargaining power. Customers tend to bargain with the sold products and services when they feel
that the organisation from which they are buying the products is having less reputation. In order
to deal with this, the organisation has to market themselves in such ways that their products and
services are being sold without much bargaining (Burns, 2016). Along with it, it is important that
the customers are provided with required discounts and they are having opportunities where they
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can feel that the organisation is providing them with the required discounts and offers. This can
help the organisations to reach new level of growth and success and ensure better growth.
Competitive Rivalries: The rising competition is one of the major issues which the
eastern-european car-making organisations are facing. It is important for the organisation to
achieve better competitive advantage in order to ensure required growth and development. It can
help the organisation to reach new level of growth and ensure that its is having a good reputation
within the market. In order to gain a better competitive advantage it is important for the
organisation to understand what perks its competitors are having and what are the needs and
requirements of its people in order to ensure that desired growth and development is being
achieved. It can help the car-makers to evaluate at what places their competitors are having a
strong advantage in selling of their products and services and what is making them gaining better
competition in the market. These all factors can help the organisation to reach new development
and ensure new growth while being in the competitive environment (Abbott, 2015). It has been
seen as the global auto-mobile industry is having car-makers which produces products that are
elite and are only available for the high class consumers whereas there are producers which
produce products which are available for an average earning customer. This is increasing the
competition of the car-makers and is constantly making them produce products and services
better than each-other. In order to deal with this, it is important for the car-makers to make use of
required strategies and attain perfection and gain a better competitive advantage.
CONCLUSION
The above report showcases the global auto-mobile industry and the impacts which the
industry has seen or facing in the world. As per the above evaluations, it can be seen as the car
making organisations in Europe are facing huge number of political issues. Brexit is one of the
major reasons behind these challenges faced by the East-european car makers. The above
evaluations showcase that the car-makers have to deal with a number of challenges in order to
achieve required growth and development. Also, the competition is huge for these car-makers
and it is important for them to ensure that they are having a better competitive advantage.
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REFERENCES
Books and journals
Abbott, R. J., 2015. Pestle Analysis for Students.
Agamirov, A. K. and et.al., 2015. Legal mindset as a factor in the study of national law and the
state in the XXI century. Mediterranean Journal of Social Sciences.6(3 S6). p.235.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Gifford, F. E. and Reisig, M.D., 2019. A multidimensional model of legal cynicism. Law and
human behavior.
Kumar, G. and Maqbool, J., 2018. Financial technology in the automobile industry.
Rothaermel, F. T., 2015. Strategic management. McGraw-Hill Education.
Scheffel, E. M., 2016. Accounting for the political uncertainty factor. Journal of Applied
Econometrics.31(6). pp.1048-1064.
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