BUS101 Strategic Management: Motor Vehicle Industry Case Study

This case study provides a comprehensive strategic analysis of the worldwide motor vehicle industry. It begins with a background to the industry, highlighting its global significance and competitive dynamics. The core of the analysis employs the Five Forces model to assess the industry's competitive landscape, examining factors such as the threat of new entrants, competition from substitutes, bargaining power of suppliers and buyers, and rivalry among competitors. Furthermore, the report addresses the specific context of Australia, explaining why motor vehicle manufacturers often prefer to import vehicles rather than engage in local manufacturing, considering factors like labor costs, government regulations, and market dynamics. The analysis is supported by academic literature and aims to provide insights into the strategic challenges and opportunities within the automotive sector.

Strategic
Management

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Contents
Introduction...........................................................................................................................................2
Main Body.............................................................................................................................................2
Background to the study....................................................................................................................2
Five forces model..............................................................................................................................2
Reasons for importing by the car manufacturers in Australia than manufacturing............................4
Conclusion.............................................................................................................................................4
References.............................................................................................................................................5

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Introduction
Strategic management is used within the industry having similar business models or
combination of the strategies. The organizations within the industry and their composition are
determined by the dimensions to be used to describe the groups. Strategic management
represents ability of a company to define both short and long term goals and determining
actions required to take actions attain goals. This report is all about the strategic management
of the worldwide motor vehicle industry which is also identified as the automotive industry.
The external environmental analysis of motor vehicle industry is done in the report along
with the discussion of why motor vehicle producers in Australia import than producing in
Australia.
Main Body
Background to the study
The motor vehicle industry internationally is a multi-billion industry. Although the motor
vehicle industry is highly competitive due to the availability of the large players trying to
leverage their competitive advantage in order to gain a large market share. The motor vehicle
industry includes all the companies involved in the manufacturing of the motor vehicle
comprising most machinery like engines and bodies. The principal products of the motor
vehicles are passenger automobiles comprising pick up, vans and sport use vehicles.
The motor vehicle industry has great contribution due to the technological advancement,
standardization, and introduction of mass production. General Motors (GM) Corporation has
been identified as the globe’s largest motor vehicle company with the largest private-owned
manufacturing enterprise. The greatest manufacturing of motor vehicles is done in US. There
is also substantial growth in motor vehicle manufacturing in Europe after US. The motor
vehicle industry of Europe is moving in the same direction as US.
Five forces model
A five forces model describing the worldwide new car motor vehicle industry has been
mentioned.

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The threat of new entrants: There are complete high barriers in the motor vehicle industry
which make the threat of new entrants low. There are very few players who are capable of
operating into the motor vehicle industry as it necessitates a great capital investment to fix
functions and distribution network. Add on, the existing MNCs competitors are profited from
the economies of scale which makes tough for the new entrants to enable competitive pricing
(Kibria, Al Amin, and Rifat, 2017).
Competition from substitutes: There are various substitutes and mode of communication
but none is capable of offering the same flexibility as motor vehicles offer. Therefore, the
threat of substitutes is weak. There is as such no real substitute to the motor vehicles, other
than the exception of large scale transportation which railways offer. The progress of the
customer reliance on the motor vehicles initiated with the mass manufacturing of automobile
by Ford in 1910.
Bargaining power of the suppliers: The power of the suppliers is moderated by the number
of the prevailing probable suppliers in the motor vehicle industry. The switching costs are
high due to instituting part designs and features require a great investment (Akakpo, Gyasi,
Oduro, and Akpabot, 2019). On the other hand, there is a low threat which makes suppliers
assimilate forward. For instance, the brand like Ford relied on several suppliers for the
different parts but it faced the problem with the quality and compatibility of the equipment
made by other producers. It became expensive for the company to purchase equipment from
the suppliers.
Bargaining power of buyers: The buying power is stated to the ability of customers to
negotiate prices which extract profit from the seller. The main buyers of motor vehicles are
deliberated to be private persons, commercial organization and governments. The buyers can
easily switch to the platform and can go for another brand. Therefore the bargaining power of
the buyers is moderately strong. The individual customers have influence over the price
within the offered dealership (Musonera, and Cagle, 2019).
Rivalry among competitors: The rise in the MNCs in the motor vehicle industry has made
complex conditions as companies compete on the basis of prices and non-price extents. There
are several companies in the motor vehicle industry offering several incentives to appeal to
customers to purchase from their company. It is predictable to increase competition in the
same industry and the rivalry will only increase over time (Stringham, Miller, and Clark,
2015).

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Reasons for importing by the car manufacturers in Australia than manufacturing
The car manufacturers in Australia prefer to import motor vehicles than producing in the
local country.
 There is a lack of trained manpower in the motor vehicle industry of Australia which
creates problem in manufacturing vehicles in Australia.
 Needlessly government regulations and lack of proper finance create problem in the
motor vehicle industry of Australia (Ranscombe, Rodda, and Johnson, 2019).
 The large companies cannot move to Australia if they have to produce a large car in
order to target the domestic market. It is only successful to produce in Australia if a
smaller car is to be produced.
 The companies like Toyota attributed to the unfavourable Australian dollar, high cost
of manufacturing and low economies of scale for the closure of the company in
Australia (Ahmadinia, and Karim, 2016).
 Australia has maintained low or zeroes tariffs for the motor vehicles. It has resulted in
bad deals with some of the nations. For instance, a free trade agreement with Thailand
in 2005 was made to become tariff-free for both nations. But there was no possibility
to export to Thailand (Marković, Rakita, and Filipović, 2016).
 Australia is bordered by the emerging nations with quite cheap labor cost which leads
to the less cost of the vehicle. So, Australia prefers to import vehicles in order to
remain competitive from the price perspective (Harris and Gibb, 2016).
Conclusion
The government in Australia has failed to take up its role in effective change. Instead of
offering subsidy for producing cars in Australia, the government has forceful role in shifting
local production to match local demand. Manufacturing in Australia can be improved if labor
and capital are transferred to other industries. If the method of productivity is measured than
value-added per worker in the motor vehicle of Australia can considerably come over the
average. This way Australia can stop importing and manufacture motor vehicles in the
country.

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References
Harris, C. and Gibb, J., 2016. Strategies to Prepare and Plan for Market Shocks: A Study
from New Zealand Businesses. Journal of Asia Entrepreneurship and Sustainability, 12(1),
p.77.
Marković, D., Rakita, B. and Filipović, D., 2016. Strategic Importance of Cross-Border
Acquisitions for Emerging Market Multinationals. In Neostrategic Management (pp. 189-
201). Springer, Cham.
Musonera, E. and Cagle, C., 2019. Electric Car Brand Positioning in the Automotive
Industry: Recommendations for Sustainable and Innovative Marketing Strategies. Journal of
Strategic Innovation and Sustainability, 14(1).
Stringham, E.P., Miller, J.K. and Clark, J.R., 2015. Overcoming barriers to entry in an
established industry: Tesla Motors. California Management Review, 57(4), pp.85-103.
Akakpo, A., Gyasi, E.A., Oduro, B. and Akpabot, S., 2019. Foresight, organization policies
and management strategies in electric vehicle technology advances at Tesla. In Futures
Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham.
Ahmadinia, H. and Karim, M., 2016. Competitive intelligence: a case study on Qoros
automotive manufacturing. Journal of Intelligence Studies in Business, 6(2), pp.52-65.
Kibria, M.G., Al Amin, M. and Rifat, U.A., 2017, September. Application of Porter’s Five
Forces Model in Battery Manufacturing Industries of Bangladesh. In International
Conference on Mechanical, Industrial and Energy Engineering. Retrieved (Vol. 25).
Ranscombe, C., Rodda, J. and Johnson, M., 2019, July. Visualising User Experiences:
Analysing Embodiment of UX in Autonomous Vehicle Concepts. In Proceedings of the
Design Society: International Conference on Engineering Design (Vol. 1, No. 1, pp. 4039-
4048). Cambridge University Press.