Analysis of the Global Automobile Industry: PESTEL and Porter's Model

This report provides a comprehensive analysis of the global automobile industry, focusing on the UK market. It utilizes PESTEL analysis to assess the impact of political, economic, social, technological, environmental, and legal factors on the industry. The report further employs Porter's Five Forces model to evaluate the industry's competitive landscape, including the threat of new entrants, competitive rivalry, and the bargaining power of suppliers and buyers. The analysis considers the influence of government regulations, economic conditions, consumer preferences, technological advancements, and environmental concerns on the industry's performance and competitiveness. The study aims to understand the industry's current position and future prospects within the global market, offering insights into the key drivers and challenges shaping its evolution. The report also examines the impact of the recession and other external factors on the automobile sector's operations and financial performance.

Global Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
1.1 Assessing the environment of the Global Automobile industry using PESTEL analysis 1
1.2 Assessing the environment of the Global Auto-mobile industry using Porters five force
analysis...................................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

Illustration Index
Illustration 1: PESTLE Analysis..................................................................................................5
Illustration 2: Porter's Five Force Model....................................................................................9

INTRODUCTION
Global environment have a major impact on a company that how it operates in a
particular country. The report helps to understand meaning of global business in an
automobileauto mobile industry. Every firm wants to expand its business at global level and
being engage in this will be highly beneficial for a company. The report deals with current
scenario of auto-mobile industry in UK and describe various external factors that which
affect industry such that by using PESTLE analysis as a competitive tool which help to
identify how political, social, economical, technological and environmental factors impact
on an industry while on the other side by using Porter's five force model will help to
determine its competitive advantage and its current position in market.
1.1 Assessing the environment of the Global Automobile industry using PESTEL analysis
Automobile industry is a variety of companieswhich offer different types of cars that
who are involved in their designs, development and manufacturing of motor industry. It has
been analysed that automobile sector is considered as world's most important sector in the
terms of profit earning. This sector is also affected by its external factors due to having
such a large size, its growth and revenue are impacted by external as well as internal forces
(Pestle analysis of automobile industry, 2018). A recent financial crisis had really hit an
industry in such as hard way that its overall financial market goes is affected. However, as
the global recession is passed, the sales of automotive are again on track, this sector is not
only work for manufacturing of vehicles but it also deal for marketing as well as sales and
in UK, the auto-mobile industriesy are affecteding from various external factors such as
political, environmental, social etc. These are mention below:
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Political Factors: Political factors plays an important role and gives a direct impact
on the profit of automobile industry. Basically, this factor affect political condition of a
country and that creates direct impact on business performanceThis factor consider or effects of
political trends as well as conditions of a business performance of an automotive industry
(Markey and et.al., 2018). It has been analyses that government of UK favour to low emission
vehicle and raise taxes on luxurious auto mobile sector.As the government in a world mostly
favouring low emission vehicle and even taxes on luxury vehicles are also grown higher. But the
government of UK also provide government subsidy for low emission of vehicles and the
manufacturers also started manufacturing environmental friendly vehicles as per
instruction given by government in order to protect environment from pollution and
automobile industry also receiving higher government support for low environmental
impact but on the other side government rules and regulations highly affect this sector in
the a terms of money. If a manufacturer introduce new vehicle which is related to
advanceto advance technologies, then this can easily passes all governmental rules in UK.
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Illustration 1: PESTLE Analysis
(Source: (PESTLE Analysis, 2018)

There are so many governmental and political factors that affects the business
environment of an automotive industry such that changing government rules cause
fluctuation in a the business that affect really hard. It is also analyseds that China is
considered customer's favourite brand because it offer its product and services in such a
cheap rate with low labour cost. Another political factor is export and import law that
varies in every nation. It is another concerning factor because manufacturer face
difficulties while importing or exporting products in the case where laws are quite stiff. It is
also assesseding that in this year, car production in Central and Eastern Europe (except
Russia) is again back on track which exceed 2.4 million vehicles from Asia and United
States.
Economic Factors: This is another most important factor that affect automobile
industry. Recently, the sector is hit hardaffect negatively on business environment because of
having some economic crisis such that when country's economic condition is not good, the
sales of vehicles are also affect i.e. decreases (fall). At a time of low or poor condition of a
country, the demand of vehicles are also affected During poor condition, the demand of luxury or
high cost vehicles also affected.adversely. Therefore, the tax on high price vehicles remains
high in certain markets (Smith and et.al., 2018). While it has been critically evaluated that
if the economic condition of a country is good, then sales will also remain increases. In well
developed countries, the sales are generally high and on the other side, in under- developed
countries, it is quite low as compared to them. As having a higher sales in market, the
purchasing power of customers are also high and in on another side, developing and under-
developed countries people demand low price. This shows the size of economy and globally
economic conditions which have a major impact on thea profitability of an automobile
industry.
There are various angles through which importance of economic factors of an
industry can be analyses and one of the most important factor is purchasing power of a
users. The overall industry is completely depend on purchasing power of customers and if
company offer high rates of products then user will start shifting and as a result there will be loss
suffered by many companiesAs whole industry sector is depend on buying power of a customers
and if there is a large numbers of brands then they mostly focus on purchasing low cost cars from
a market just because they know customer'sknow customer’s shifting sector (Chandler, 2018).
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That is why it is necessary to move with customerscustomer’s perspective. Another factor is
rising competition in developing market which also affect or creates fluctuation in market
segments. To decrease level of competition, it is necessary for an automobile industry to sell
their products in low price as compared to their rivals which helps to increases their
financial status of a company.
Social Factors: An automotive sector is also influenced by social factors and it plays
another important role. By keeping customer's preference, producer start producing new item
every year this shows that how social factor affect company's profitabilityManufacturer always
produce those products as per their customers demand and every year, new models are
continuously released by keeping people's preference in mind. . It has been analyseds that
there is increasingly popularity of low carbon lifestyle and many peoples choose specific
styles in certain cultures while in other markets, SUVs are on higher demand. So it shows
that each and every person demand differently and have their own expectations which has
to be filled by a sector (Lewis and et.al., 2017). Age distribution is another factor that must
be kept in mind while targeting customers and these social changes are continuously
affecting brand name and modelsand models too. Beside this, from culture to culture,
public's style and preference are also differ and as a result some particular model will sell
in a market.
Due to these social factors or changing trends sometime make older model out of
dateoutdated and company faces big loss. In UK, people demand for self drivingself-driving
cars that help to promote growth through sale of cars while on the other side, there is
another increasing demand for vehicle sharing and creates ride- hailing programs that help
to improve transportation.
Technological Factors: These are consider one the most important and crucial
factor in an automobile industry and all brands in this sectors are also make huge
investment regarding research and development such as Toyota, Hyundai and Volkswagen
are investing in low emission with environmental friendly vehicles. Apart from this, Toyota
is also planning to introduce driverless car in coming years (Kirton and Maclaren, 2018).
All the industry who are based on this industry are more focusing on technological factors
that help to attract wide number of customers towards them. Now a days, technological
innovation becomes a major basis for the differentiation for the makers of automotive and
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it is so because theit focus of customers are shifted towards a fuel efficient as well as high
mileage. It is also considered that the sale of low emission and fuel efficient vehicles are
quite high as compared to others and this shows that technology is one of thea most
important factor that affect sales and profitability of an industry.
Legal factors: Legal factors are another factorcause that affect the performance of a
company. If a country sell vehicle to another state, then they must follow all the laws
related to product quality and safety (Singh, Singh and Singh, 2018). While on the other
side in automobile industry, the pollution laws are strict in which, if the vehicles are being
exported, they have to pass rule related to emission control. Next laws are related to safety
that creates an important impact on the sales of products or services. A recent example is
Toyota which had to recall its vehicle just because of its faulty airbags. Due to such cases ,
government start imposing new laws with strict safety of their customers. Beside this, every
firm has to deal with safety law,, tax law and environmental law in order to operate in
international market.
Environmental Factors: Ecological as well as environmental factors also affect the
working environment of automobile industry and it is considered as one of the most
challenging issue that threat inat entire world. Therefore, car manufacturer has to pay
attention on it. The laws related to environment and carbon emissions are becoming strict
from past and the industry has to focus upon low emission vehicles (Rees and et.al., 2018).
Thosee vehicles which emit low gases and help to consume less fuel consumptionuel, they
receive tax subsidies and even are favoured by government as well as laws. In UK, only
those vehicles are considered which passes pollution test and environment friendliness has
become a most important test for producers in this centurytime period due to government
start focusing on pollution control.
1.2 Assessing the environment of the Global Auto-mobile industry using Porters five force
analysis
Recession had created bad impact on the working environment of a company and
there are so many factors that affect a sector one of then is Porter's five force model which affect
its competitiveness as well as attractiveness in market which is discussed below:by using Porter's
five force model it will help to analyses its competitiveness and this is describe below:
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Threat of new entrants (weak): The threat of new entrant in an automobile industry
is quite weak because it is difficult for a new brands to enter in new brand-new market as it
requires a lot of investment. At initial level, it requires huge investment to set up their
business such as require facility related to manufacturing, network system of selling as well as
distribution, new employees while on the other side if a new brand emerges into a market then it
definitely comes with new innovative products need manufacturing facility, network of
distribution and hire skilled staff. On the other if new brand enter in a market and brings many
innovative products with them, it will creates barrier for an existing brands because of
chances to gain market becomes low. Still brand image and their reputation are consider
one of the most important challenge. Now a days and even it is competitive advantage for
them too. For smaller companies, it is quite difficult for them to achieve economies of scale
because every new brand has to focus on the quality of product that they are offered
(Porters five force model, 2018). On the other side, penetrating new market is not so easy
because government applied different import taxes just to discourage foreign brands. It
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Illustration 2: Porter's Five Force Model
(Source: (Porter's Five Force Model, 2018)

shows that there are so many factors that affect threat of new entrant in automobile
industry.
Bargaining power of suppliers (weak): The bargaining power of suppliers of car
sector is quite weak in many region. As manufacturer require so many inputs such as
labour, raw material etc. which creates direct impact on the profitability of a company. For
example, in Slovakia, it spends $ 890 million for its inauguration of automobile factory
which becomes a major event and even after collapsing of communism, many foreign car
manufacturers moved towards a local market in order to build their own factories in
Poland, Romania and Hungary. After this, a result cameomes, thatwhich shows, As a result,
suppliers are extremely open related to their demands as well as their requirements and
thesey suppliers have to perform theirm entire work as per set by brands store only while o.
But on the other side, these brands store did are not face any problem to switch from one
suppliers to another. This is the only reason that is why that shows bargaining power of
suppliers are consider quite low for an automobile industry in UK (Lewis and et.al., 2017).
In Eastern Europe, producers are not making cheap rate care, as Volkswagen assembles to
Touareg, SUV's and even Q7 Audi and then ships all of them to Germany for their
finishing which help to attract many suppliers towards them.
Bargaining power of buyers (moderate): The bargaining power of buyers are
consider so strong as compared to another factor in order to determine competitive
advantage. It has been analyses that there are so many government agencies which help to
increase purchasing power of stores and they buy those products at cheap rates It is also
analysesd that even government agencies and corporations are buy a group of vehicle that help to
increases buying power of customers but at lower rates (Von Bredow, 2017). But on the other
side Even the buyers are also quite sensitive related to their price sensitive that even they can
switch to another brand who offer best quality product at reasonable rates as compared to
other ones. High gas prices in West side also encouraged consumers to start shifting from
big cars as well as SUV's and as a result many countries started producing products as per
customer's demand. However, no buyer have a threat of backward integrationing and it
shows that the bargaining power of this sector is quite strong and now big brands are more
focusing on building customers loyalty by means of design, quality as well as offered prices.
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Threat of substitutes (weak): Automobile industry have weak threat of
substitution,e even though there are so many other options available as mode of
transportation which includes bus, trains and planes etc. But none of them will provide that
much comfort and convenience that your own cars do. That is why people chooses car
while going for travelling while on the other side choosing other mode of transportation,
they have to wait or there is so many chances to miss those alternatives (Brack,2017). So it
shows that threat of substitute is quite weak. Apart from this, still there are few threat
from substitute products where daily people searches for cheaper and easier way of
travelling. Now people demand for those products in automobile industry which are based
upon fuel efficiency and whichhelp to saves time, money and efforts but many developed
countries try to releases new products as per their demand. So it proves that there is weak
threat of substitutione in automobile sector.
Competitive rivalry in industry (Quite strong): In automobile sector, there is a
tough competition in all over world and it is also analysed that the number of brands is low
and the exit barriers are high and if a brand try to exit then they have to bear a large
amount of loss. Every company have their own rivals and to become superior in market, it
is quite necessary for them so offer their products/ services at cheap rate as compared to
their competitors. Each firm wants to maintain its customerscustomer’s loyalty, which shows
the exact market share of a company (Brown, 2018). Moreover, different brands target
various market segments but yet they covered because brands only compete on the basis of
its products cost, design, customer loyalty, quality and cope up with new and latest
technologies. To maintain their brand image in market, every brandtrade name tries to
introduce new products in order to satisfy their customers need and maintain users
segments too.
CONCLUSION
By summing up above report, it has been concluded that global environment plays
an important role in an automotive industry and to expand the sector in international level,
it is necessary to follow all the rules and regulation made by government. In this report it is
also concluded that there are some external factors that affect company's performance
which can be analysed by PESTLE which includes political, social, economic, legal and
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environmental factors. On the other side the report also shows its competitiveness by using
Porter's five force model which help to determine its bargaining power of suppliers, buyers
and threat of new entrants, substitute.
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