Strategic Analysis of the Global Motor Vehicle Industry Report

This report offers a strategic analysis of the global motor vehicle industry, examining its historical background, external environmental factors, and the reasons behind Australia's shift from manufacturing to importing vehicles. It begins with a PEST analysis, evaluating the political, economic, social, and technological factors shaping the industry. Subsequently, it applies Porter's Five Forces model to assess the competitive dynamics, including the threat of new entrants, bargaining power of buyers and suppliers, threat of substitutes, and competitive rivalry. The report then delves into the specific context of Australia, exploring the factors that led to the decline of domestic car manufacturing and the subsequent reliance on imports. These factors include economic considerations like labor costs and investment, and strategic decisions related to market targeting. The report concludes by synthesizing these analyses to provide a comprehensive understanding of the industry's strategic landscape and the forces shaping its evolution, offering valuable insights for students on Desklib.

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Introduction
The main aim of this report will be to discuss about the motor vehicle industry around
the world, in the context of strategic management followed by the organizations, along with
an external environmental analysis on the industry, which will include a PEST analysis,
which will involve political, economic, social and technological factors, and Porter’s Five
Forces. The last part of the essay will discuss about the reason of importing the motor
vehicles from outside rather than manufacturing in the market place of Australia.
PEST Analysis
The PEST analysis of the global motor vehicle industry can be described as follows:
Political Factors – The motor vehicle industry of the developing nations are
constantly under pressure from the local as well as national government. This sector
generates a fair amount of profit among all the nations where the organizations engaged with
this sector performs their business operations. The organization have engaged themselves to
provide something innovative to their customers in spite of ever-increase of the
manufacturing costs. It is very difficult for this sector to remain competitive globally for this
sector, as there are many layers in the market who all are fighting against each other to enjoy
the competitive edge over others. The increase in the number of middle class people in the
developing nations like India, China and Brazil has increased the demand of motor vehicles
industry. The political instability and the corruption has adversely affected the sales in this
sector, which also affected the various strategic management decisions on the organization s
engaged in this sector (Ho 2014).
Economic Factors – The motor vehicle industry is hugely affected by the economic
or financial conditions of the nations where they are operating their businesses. Formulation
and implementation of the strategic decisions are affected by the fluctuation in the interest

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and inflation rates along with the rules and regulations related with the trade between the
nations regarding the import and export of different vehicle parts around the world. The gross
domestic product varies from nations to nations and it also affects the motor vehicle industry
globally. The strategical decisions taken by the organizations hugely depends and all these
and it affects the revenue earning of the organizations and implementation of those decisions
depends on the economic or financial state of the nations. The sales can be boosted in the
developed as well as developing nations by implementation of innovative ideas in these
sector (Miyakawa 2017).
Social Factors – The attitudes of the people among the community and the cultural
values affect the organizations engaged in motor vehicle industry. The attitudes of the society
towards a particular product helps to strategize the plans and implementation of them in the
manufacturing of the motor vehicles. Different types of people have different types of
requirements. So, the organizations need to manufacture the cars according to the
requirements and strategize their plans in the manufacturing as well as in the sales and
marketing of the finished products. The motor vehicle industry plays a vital role in the growth
of the society and finance of a nation globally, and plays an integral part in the society
(Rakesh 2014).
Technological Factors – The world is becoming tech-savvy day by day, and motor
vehicle industry has crossed several phases of innovative stages since manufacturing of the
first motor car. The customers are expecting from the various organization from this sector to
provide something innovative to them, which will include latest features and accessories,
which has increased the challenge for the manufacturing organizations related to those sector.
For example, some organizations are innovation their strategy implementation of smart,
driverless and flying cars, and the organizations are facing difficulties to match the pace with

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the ever changing advancements in the technologies used in motor vehicle industry (Fuchs
2014).
Porter’s 5 Forces
1. The threat of new entrants – This possess a low threat in motor vehicle industry.
The factors which are involve all the barriers like requirements of upfront capital, brand
equality, government and legislation policy and capability of distributing the product. There
are already many players in this sector and all of them have the access to inputs production as
well as financing required for the manufacturing process, along with the access to distribution
channels. It may allow some organizations to dominate the motor vehicle industry, and will
able maintaining high entry barriers (Gwynne 2017).
2. The bargaining power of buyers/customers - This varies from market to market,
and also from organization to organization. It can be said that it is secure to say the
consumers have some buying power, but again it is dependent on the market. The purchase
done by the buyers are an important part of the annual revenues earned by the sellers. The
switching costs are also low for the products of other industry.
3. The threat of substitute products - This may prove to be a high force, as the
switching cost may become high due to introduction of new cars, and it is impossible to sell a
car in the purchasing price of that car. Product differentiation plays a major part here. This
increases when the buyers face very fewer switching costs and the price of the substitute
product is low. The differentiated industry products that are being valued by the customers
helps to reduce this threat. There are many similar kinds of products available in motor
vehicle industry, which possess little or less threat of alternative products.
4. Bargaining power of suppliers – This involves all the parties engaged to
manufacture a car, like all the suppliers of tires, parts, electronics, components and even the

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assembly line employees. The power of the suppliers depends on the numbers of suppliers
present globally for this sector. The products of the suppliers create high switching costs and
the substantial resources available with them provides highly differentiated product among
this sector.
5. Competitive rivalry – The competitors are mainly homogeneous in this sector,
where they vary in abilities as well as in resources possessed by them, which helps them to
differentiate from each other. The common rivalry includes service after the sale, process and
innovation. The rivalry in this industry increases with equally balanced competitors and slow
growth within the industry. The promotional part also varies from organization to
organization, which intensifies the rivalry among the competitors (E. Dobbs 2014).
Car Manufacturing in Australia
There are reasons which lead to stop the car manufacturing in Australia, and as a
result they have started to import the parts from other regions of the world. Bad deals with
different organizations as well as between the nations around the world have worsened the
situations. The non-sustainability in the manufacturing sector also stopped the process in the
region of Australia (Law 2017). The labor cost is much cheaper in the developing nations, so
the manufacturing has been stopped in Australia and they started to import rather than
manufacturing by their own. The production costs are more than the developing nations,
which helps to stop the manufacturing process in Australia. Lack of capital investment in
equipment increase the labor cost in the region. Improper targeting in the motor vehicle
industry also shut down the manufacturing units in Australia. All these reasons resulted in the
closure of the closure of the manufacturing of motor vehicles and started to import them from
outside the market place of Australia (Anderson and Garnaut 2017).

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References
Anderson, K. and Garnaut, R., 2017. The political economy of manufacturing protection in
Australia. In The Political Economy of Manufacturing Protection (pp. 159-183). Routledge.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Fuchs, E.R., 2014. Global manufacturing and the future of technology. Science, 345(6196),
pp.519-520.
Gwynne, R., 2017. New horizons? The Third World motor vehicle industry in an
international framework. In Restructuring the Global Automobile Industry (pp. 61-87).
Routledge.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), pp.6478-6492.
Law, C.M., 2017. Motor vehicle manufacturing: the representative industry. In Restructuring
the Global Automobile Industry (pp. 1-18). Routledge.
Miyakawa, Y., 2017. The transformation of the Japanese motor vehicle industry and its role
in the world: industrial restructuring and technical evolution. In Restructuring the Global
Automobile Industry (pp. 88-113). Routledge.
Rakesh, C., 2014. Pest analysis for micro small medium enterprises sustainability. J. Manag.
Commer, 1, pp.18-22.