Detailed Examination of Key Issues in the UK Automotive Sector

This report examines key issues impacting the UK automotive sector, focusing on overcapacity and sustainability. It analyzes these issues through a PESTEL framework, evaluating their political, economic, social, technological, environmental, and legal implications. The report explores the positive and negative influences of these issues on Rolls-Royce Motor Cars Limited, providing specific examples of how overcapacity and sustainability concerns have affected the company's sales, revenue, and market position. The student reflects on the challenges faced during the report's preparation, including data collection and report structuring, and outlines the learning gained about the automotive industry and Rolls-Royce's operations. The report concludes with an assessment of the broader impacts of these issues on the sector's performance and future strategies.

KEY ISSUES IN THE
HOUSEHOLD
FURNISHINGS/
AUTOMOBILES/
FOOTWEAR SUBSECTOR
IN THE UK

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Two issues impacting the automotive sector...............................................................................1
PESTEL of the two issues............................................................................................................2
Positive influence of issues on organization................................................................................3
Negative influence of issues on organization..............................................................................4
Personal reflection.......................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Automotive sector generally comprises of all the organizations and enterprises which are
engages in the production and marketing of the motor vehicles. Rolls-Royce Motor Cars Limited
is predominately a luxury auto-mobile Company being established by Torsten Muller-Otvos in
1998 and placed in England, UK. It manufactures all types of cars ranging from Ghost to
Phantom. This report addresses the two issues impacting the automotive sector, PESTEL of the
two issues, Positive influence of issues on organization, Negative influence of issues on
organization and personal reflection.
TASK
Two issues impacting the automotive sector
Auto-mobile sector basically constitute all the companies as well as the organization
which are highly involved in the design, manufacturing and marketing of the motor vehicles.
Auto-mobile sector has always been an integral part of entire economy and has popularized itself
across the entire world. With its ever-increasing significance in small as well as the medium
sized organizations, almost every sector in this industry faces the various unique challenges that
creates a long lasting impact on them (Zanchi and et.al.,2018). The main key issues which has
impacted this sector are
Overcapacity
Just like the other industries, this sector has undergone various ups as well as downs thus
overcapacity becomes the main problem which generally occurs when the manufacturer or
producer have invested their resources like payroll along with the materials for the construction
of the particular quantity and later on find that there is no need for this production of such
quantity. This results in the over-expenditure which eventually damages the cash flow within the
sector. This also increases the break-even points which could pose a serious problem in
economic downturn along with the increase in wastage (Faisal and et.al.,2018). Besides this, the
overcapacity leads to the overproduction of many of the material due to which the inventory
level increase and at the end of the day, there remains unsold inventory which seem to cause the
issue of inventory's lean waste thus producing the material and product in the excessive amount.
This issue of overcapacity has always influenced the automotive sector and is estimated to
increase in the near future.
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Sustainability
The issue of sustainability has always dominated the auto-mobile sector in a most
negative way. A survey shows that the automotive industry is on the top of the list which has
degraded the environment to a great extent. There are various environmental factors such as
CAFE, fuel economy, emission of the harmful gases which are transforming the automotive
industry from being sustainable to the biggest contributor in environmental degradation. As now
more and more consumers are increasingly aware of the sustainability therefore this issue may
hinder the sales and revenue of many organizations in this sector. The automotive vehicles emits
a range of harmful gases like hydrocarbons, nitrogen oxide and various hazardous pollutants
which leads to the disturbance in the ecological balance. These gases eventually releases from
the fuels of the vehicles and pollute the environment due to which the global temperature has
increased and resulted in the global warming. The engines fitted in the vehicles releases around
120gm of the carbon di oxide which alter the ecosystem and decrease the intensity of rain. Thus
the automotive industry is the foremost industry which faces the problem of sustainability and
need to produce strategies on producing fuel efficient vehicles. This sector is considered as the
primary sector due to which the ozone layer of the earth has been destroyed as the various gases
coming out of the engines damages this layer which eventually fills the environment with
harmful sun-rays and other gases.
PESTEL of the two issues
The major two issues which have dominated the auto-mobile sector are overcapacity and
sustainability
Political factors
The issue of overcapacity can be categorized under the political factors where it has
impacted its various factors. As the overcapacity and overproduction leads to a high amount of
expenditure along with the great amount of wastage, thus this will directly impact the prices at
which they sell their product and hence will directly lower the taxation ratio of the country.
Economic factors
The issue of overcapacity has been imperative while talking of its impact on the
economic environment (Kausar, Garg and Luthra, 2017). As the disposable income of the
population of UK has been low due to the recent economic downturn, thus the spending of
people on luxury items has been reported to be low in 2019 thus this problem of overcapacity
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will ultimately leads to decrease sale of the vehicles. As the company will produce more
products than the required then it will definitely have a negative effect on their sale as there will
be less people purchasing it due to less disposable income.
Social factors
The issue of sustainability have a great impact on the lifestyle of the population as well as
their increasing demand for fuel efficient vehicles. Now a days, more and more consumers are
highly educated and thus knows the importance of keeping themselves and then environment
healthy. Due to this, their demand for the efficient cars which produces no harmful gases has
increased to keep the environment safe and pollution free (Lampón, Cabanelas and Benito,
2015). This will directly impact their health as they will be able to breathe fresh air.
Technological factors
The main problem in auto-mobile sector of overcapacity are highly impacted by these
factors. As this sector recently have no technology that can solve the issue of overcapacity and
determine the exact amount of material that would be required for the production thus the high
effect of advanced technology can lead to the increase in this issue.
Environmental factors
The issue of sustainability can be categorised under this factor where the main problem
hindering the balance between nature and ecosystem is the emission of harmful gases from the
engines of vehicles thus this problem forms the biggest part of this factor. As this factor is
mainly concerned with the climate and weather change therefore the gases discharged from
vehicles enters the environment and changes the ecological balance.
Legal factors
The need for the safety regulations and laws regarding protecting the environment for
carbon emission has driven the issue of sustainability in a different direction. Till date, there are
no stringent laws that governs the emission of gases and provides a break to this release due to
which h this issue has been a buzz (Stead, 201). The industry needs to follow the environmental
strictly and should focus on reducing this emission to less than 0.5mg.
Positive influence of issues on organization
Although the two issue of overcapacity and sustainability has been the great challenge for
many organization but it has also projected the positive impact on them and helped them to
become a market leader. One of these company is Rolls-Royce where the these two problems has
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helped them to achieve competitive advantage and establish their position in the market. The
overproduction of various vehicles and products have helped the organization to increase their
sale and revenue (Loureiro, Sarmento and Le Bellego, 2017). For example, in US during the
economic boom, Rolls Royce estimated the demands of the customer fro luxury items and their
disposable income. Based on this, they increased the manufacturing of their units on great level
and manufactured the cars in much high number then needed. Thus due to the deflation and goof
economic conditions, the spending of consumers suddenly increases then estimated and they
began to purchase more cars. In the year of 2017, Rolls Royce sold more than 50000 cars to the
population thus due to the overproduction they saved themselves from the shortage which thus
increased their sale to about 30% in that year (Kushwaha and Sharma, 2016). Another issue of
sustainability also increased the image and goodwill of Rolls Royce in the market. In the year,
2015 Rolls Royce understood the growing demand of consumers for fuel efficient cars and came
out with Phantom VIII mileage car which was equipped with LED lamps that emits no harmful
gases along with the automatic transmission engine which transforms the nitrous oxide present in
the engine into harmless gas just before it is released in the environment. More than 30000 units
of this car was sold that year which raised the image of the company and made them a market
leader along with a great customer base and increase revenues.
Negative influence of issues on organization
Besides the positive impact, Rolls Royce also faced a high amount of decreased sale due
to these two issue and made their position weaker than their competitors. During the recession in
UK, the spending pattern of the people on luxury items decreased to a great extent. At that time,
Rolls Royce without analysing the market produced a huge amount of units for sale which
eventually led to wastage of their raw material and hence the cars as only few people purchased
the car. This ultimately had a huge impact on their operations and thus reduced their profitability
ratio and the amount of sales (Aithal and Aithal, 2016). Besides this, it also resulted increased in
the cost of their production process and other overhead expenses.
On the other hand, the issue of sustainability also led to a serious brunt in their market
position. Initially the car launched by Rolls Royce was fitted with an engine that led to the
discharge of a great amount of carbon di oxide and other harmful pollutants. This resulted in
their suspension of the carbon credit as it was claimed that they were not following the various
laws and legislation for the environment and has not reduced the carbon emission to the given
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amount. This eventually led to the confiscation of their licence and hence the carbon credit due
to which their goodwill in the market decreased to great extent until they committed to launch
the electric cars.
Personal reflection
While preparing this report, I came across the various challenges which hindered my the
way of presenting the report. These challenges was very hectic for me as I was unable to analyse
the various things. The first challenge which I faced during the preparation was that it was
difficult for me to collect the data on various attributes of the auto-mobile industry. I had to
analyse and assess the various sources which I felt was beneficial for gathering the data. The
second challenge that came across my way was that I had no knowledge how to properly
structure the report and how to present it. I was unable to properly position the topics according
to their importance which was a problem for me. In order to overcome the problem of data
collection, I visited various websites and journals for gathering the information. Besides this, I
addressed various magazine and government books which helped to collect the reliable and
genuine information (García-Madariaga and Rodríguez-Rivera, 2017). This also helped me to
have a in depth knowledge of the automotive sector. On the other hand, To solve the problem of
report preparation, I consulted my senior for making the report presentable and effectively
structuring it. Besides this, I also took the help of internet for report preparation.
Despite the various challenges that I faced while its preparation, I learned a lot about the
automotive industry and the organization Rolls Royce. I came to know about the various issues
which this industry faces while implementing their strategy and which becomes a roadblock in
their success. I also learned about how these issues impacts the overall performance of the
industry and its various sectors (Froggatt, 2017). Besides this, This helped me to have a deep
understanding of the company Rolls Royce and their functioning as well as how these issues has
transformed their entire operational efficiency. I came to know about the negative impact of
these issues on rolls Royce and after assessing these negative impacts, how they have altered
their strategy to have a positive effect of these issues on their operations.
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CONCLUSION
It has been summarized that the automotive industry encounters various issues which
influences thus overall performance but the major two issues are overcapacity and
overproduction which poses the serious problem for sector and hinders their profitability ratio.
Besides this, on one hand these issues impact the organization in a negative way and on the other
in a positive way. While Sustainability and overproduction helps the organization to create a
great customer base and increase their sale on the other side they can also lead them to lose their
market share.
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REFERENCES
Books & Journals
Aithal, P.S. and Aithal, S., 2016. Nanotechnological Innovations & Business Environment for
Indian Automobile Sector: A Futuristic Approach. International Journal of Scientific
Research and Modern Education (IJSRME).1(1). pp.296-30.
Faisal, M and et.al.,2018. Review of energy storage system technologies in microgrid
applications: Issues and challenges.Ieee Access.6. pp.35143-35164.
Froggatt, D., 2017. Motor components: locational issues in an international industry.
In Restructuring the global automobile industry (pp. 156-168). Routledge.
García-Madariaga, J. and Rodríguez-Rivera, F., 2017. Corporate social responsibility, customer
satisfaction, corporate reputation, and firms’ market value: Evidence from the automobile
industry. Spanish Journal of Marketing-ESIC.21. pp.39-53.
Kausar, K., Garg, D. and Luthra, S., 2017. Key enablers to implement sustainable supply chain
management practices: An Indian insight. Uncertain Supply Chain Management.5(2).
pp.89-104.
Kushwaha, G.S. and Sharma, N.K., 2016. Green initiatives: a step towards sustainable
development and firm's performance in the automobile industry. Journal of cleaner
production.121. pp.116-129.
Lampón, J., Cabanelas, P. and Benito, J.G., 2015. The impact of implementation of a modular
platform strategy in automobile manufacturing networks. Governance and Economics
Research Network Working Paper B, 2.
Loureiro, S.M.C., Sarmento, E.M. and Le Bellego, G., 2017. The effect of corporate brand
reputation on brand attachment and brand loyalty: Automobile sector. Cogent Business &
Management.4(1). p.1360031.
Stead, D., 2016. Identifying key research themes for sustainable urban mobility.
Zanchi, L and et.al.,2018. Analysis of the main elements affecting social LCA applications:
challenges for the automotive sector. The International Journal of Life Cycle
Assessment.23(3). pp.519-535.
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