Strategic Management Analysis: New Automotive Industry - Report

This report provides a comprehensive analysis of the strategic management within the new automotive industry. It begins with an executive summary outlining the report's objectives, which include exploring the alternative energy automotive sector globally, emphasizing the importance and sources of alternative energy, and analyzing the industry using Porter's Five Forces model. The report then delves into the historical context of the new automotive industry, highlighting the emergence of electric vehicles and their evolution. It examines alternative methods of reducing vehicle pollution, such as electric cars, green batteries, alternative fuels, and solar energy. The core of the report applies Porter's Five Forces model to the worldwide new car industry, evaluating rivalry among competitors, the bargaining power of customers and suppliers, the threat of substitutes, and the threat of new entrants. Finally, the report explores the rationale behind Australia's shift from manufacturing automobiles to importing them, considering factors such as market demand, import/export laws, and labor costs. The conclusion synthesizes the findings, emphasizing the industry's shift toward greener alternatives and the application of strategic analysis tools. The report references several sources to support its findings.

Running Head: STRATEGIC MANAGEMENT IN NEW AUTOMOTIVE INDUSTRY
STRATEGIC MANAGEMENT IN NEW AUTOMOTIVE INDUSTRY
Name of the Student
Name of the University
Author Note

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Executive Summary
The aim of this report is to analyze the alternative energy automotive industry
globally. It shall emphasize on the need and sources of alternative energy. Then the sector
will be analyzed with the help of Porter’s five forces model. Lastly, it will focus on the
Australian market and why it has stopped manufacturing automobiles. Rather the country is
wholly dependent on import of Automobiles.

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Table of Contents
Introduction................................................................................................................................3
Porters 5 forces Model...........................................................................................................4
Conclusion..................................................................................................................................7
References..............................................................................................................................8

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Introduction
The increasing global pollution is exponentially degrading the quality of nature
largely. Today the world is viewing the extent of pollution through sacrifice of aquatic and
land animals. On the other hand, the greenhouse effect has increased the global temperature
melting both the polar caps. Through broadcast and social media, we viewers have seen the
degradation of the quality of life of polar bears and dolphins. This is mainly due to the
behavior of the human race. Conversely, awareness have increased and people are shifting to
natural alternatives. Among variety of choices, the automobile industry is also shifting
towards greener alternatives. The electrical and ecofriendly cars are the vehicles of the next
generation, which are being hugely accepted by the consumers. The developed and the first
world countries have already increased the shift from conventional petrol and diesel vehicles
to their electric counterpart. Companies like Tesla are trying to change the completely
automotive industry by commercializing the vehicles through mass production to achieve
economies of scale. According to JD Power Consultancy, one third of the total air pollution
will decrease if the diesel and petrol cars are improves and 14% of the total emission will
decrease if the pace of shift from conventional vehicles to electric vehicles continues
(Cherutini et al. 2015).
History and Background of New Automobile Industry
The first electric vehicles first came into limelight in the 1960’s. Within 1990, the
range of electric vehicles became very famous among the automotive companies. However,
in those days the due to limited resources and limited technology the manufacturing cost was
very high. However, the niche market existed at that time but the performance of the electric
vehicles was very poor, so the vehicles could not be commercialized. The battery at that time
was normal cathode anode batteries so the horsepower was not enough to withstand the

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torque of the engines. Thomas Parker built the first electric car in the year 1895. But due to
the limitation of power and technology of the era the model quickly became unacceptable to
the industry. The first company to commercialize the electric cars was Samuel’s Electric
Carriage and Wagon Company. Later the big shot companies like General Motors, Honda
and Toyota entered the market and started producing electric cars but the market acceptance
ratio was very low. But these days due to increased awareness and degrading environment,
market acceptance has increased greatly.
Alternative ways of Reducing Vehicle Pollution
To combat the effects of pollution and extend the life of our planet and its habitat,
alternative ways of energy has to be undertaken more. The automobile industry being one of
the largest contributor to environmental pollution is choosing to shift its dimensions from
diesel and petrol to alternative sources of energy. They are:
a) Electric Cars: One of the alternatives of petrol and diesel cars is the electric car.
Electric Vehicles are one of the most suitable alternatives to check the pollution level
of the environment. It will help in the reduction of monitoring cost, reduction in the
proportion of fossil fuel used in transportation and the amounts of carbon dioxide
emitted from automobiles, improvement in the air quality directly helping to reduce
global warming.
b) Green Batteries: Eco friendly batteries, which are being used in some mobile phones,
are going to target the automobile industries in the coming couple of years. This will
directly help in the reduction in the pollution. Lithium ion batteries are not only
carbon negative they also are small and convenient. They are specifically targeting the
truck market, which emits maximum carbon dioxide in the air (Dobbs 2014).

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c) Alternative Fuel: With the government laws becoming more stringent, automobile
manufacturing companies are shifting to alternative sources of energy. The nearest
and best alternative of petrol and diesel is CNG or compressed natural gas. The
characteristics of CNG is that it produces low emissions and large variety of other
ecofriendly benefits.
d) Solar Energy: Though the path to harness solar energy to generate electricity for
vehicles is very long. Its storage and usage are in the research and development stage
of experimentation. If this process comes into effect then the pollution level will be
reduced drastically within a few years. (Why is Australia still protecting an extinct car
industry? - MacroBusiness, 2019)
Porters 5 forces Model
The components of Porters 5 forces Model are as follows:
a) Rivalry among existing competitors
b) Bargaining power of the Customers
c) Bargaining Power of Suppliers
d) Threat of Substitutes or Substitution
e) Threat from New Entrants
Analysis of the Worldwide New Car Industry using the above five forces:
a) Rivalry among existing competitors: The market for alternative energy
automobiles is highly competitive in nature. (Narins 2017)This is due to the
oligopoly nature of the industry where there exists few competitors but have
intense competition among themselves. Some of the companies are Tesla,
Chevrolet, Hyundai, Volkswagen, Nissan, BMW and Kia. The external factors
responsible for this strong force are:

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 Limited frequency of Firms (weak force)
 High level of Aggressiveness (strong force)
 Cost of switching is low (strong force)
b) Bargaining power of the Customers: The influence of the customers on the
companies operating in this sector and the functional components such as the
batteries, solar panel and equipment industry is to be considered in this section of
porter’s five-force analysis.(Yunna and Mishing 2014) The external factors
influencing this area of concern are:
 Low cost of Switching (Strong Force)
 Availability of Substitutes (medium force)
 Low frequency of Purchase (weak force)
c) Bargaining Power of Suppliers: The business in this industry entirely depends on
the uniformity of suppliers. (Liu et al. 2013)This industry is also highly
dependent on the component parts, which are provided by the suppliers. However
the number of suppliers are huge in that respect, so the shortfall of component
parts do not occur very often in the market. The external factors are:
 Medium level of forward integration (medium force)
 Medium size of the suppliers (moderate force)
 Medium supply level (moderate force)
d) Threat of Substitutes or Substitution: The particular industry is the technology of
the next generation. The industry is itself the main threat of the conventional
automotive industry. On the other hand, as the market is new and unique, the price
of individual products are very high so the customers will tend to shift away to the

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conventional industry while purchasing a product. The external forces concerned
in this section are:
 Cost of switching is low (Strong Force)
 Availability of Substitutes (Medium force)
 Medium Performance of Substitutes (moderate force)
e) Threat from New Entrants: The alternative energy automotive industry
experiences comparatively low level of threat from new entrants solely due to the
huge capital requirement of the industry. On the other hand, the research and
development requirement in the industry is time consuming and takes years of
experience to develop ideas in this field. Therefore, the external forces that are
concerned with this section are:
 Low cost of switching (strong force)
 Medium level of substitutes available in the market (medium force)
 Low level of performance from substitutes (medium force)
Rationale behind importing cars rather than manufacturing in Australia
To understand the rationale behind importing cars rather than manufacturing,
we need to understand why manufacturing automobiles has stopped in Australia. To
understand in brief, the volumes in manufacturing were high but the market demand
were not enough for the car manufacturing companies to survive in the market.
The main brands manufacturing cars in the country was Ford, Toyota and
Holden. Among them Ford was the first company to manufacture cars in the country,
since 1925. On the other hand, the import export law of Australia allows the market to
import cars at negligible or zero tariff. (The end of car production in Australia - what
went wrong | Autocar, 2019) Therefore, the manufacturing companies did not have a

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competitive advantage in the market. In addition, the cost of labor in the country is
very high. The main exporter of Automobile in Australia is Japan and China, which
specializes in economies of scale to bring down the cost of production. So, the market
is filled with foreign cars. (Tesla Inc. Five Forces Analysis (Porter’s Model) &
Recommendations - Panmore Institute, 2019)
Conclusion
From the above study, we can infer that the world is shifting to greener alternatives.
Better late than never the automobile industry also is also going with the flow. The report
firstly identifies the sources of alternative energy providing a brief on the changing
automotive industry globally. Then we use Porter’s five forces to analyze the present status of
the industry. Finally, we focus on Australian market of Automobile and why the cars are
imported and not manufactured.

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References
Cherubini, S., Iasevoli, G. and Michelini, L., 2015. Product-service systems in the electric car
industry: critical success factors in marketing. Journal of Cleaner Production, 97,
pp.40-49.
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.
Holden closure could come earlier (2019). Holden closure could come earlier. [online]
NewsComAu. Available at: https://www.news.com.au/holden-to-end-car-
manufacturing-in-australia-and-import-cars/news-story/
35a9521c87efb63e2185fc693e9ab789 [Accessed 22 Aug. 2019].
Liu, J., Yang, F., Wang, H., Ouyang, M. and Hao, S., 2013. Effects of pilot fuel quantity on
the emissions characteristics of a CNG/diesel dual fuel engine with optimized pilot
injection timing. Applied Energy, 110, pp.201-206.
Narins, T.P., 2017. The battery business: Lithium availability and the growth of the global
electric car industry. The Extractive Industries and Society, 4(2), pp.321-328.
The end of car production in Australia - what went wrong | Autocar (2019). The end of car
production in Australia - what went wrong | Autocar. [online] Autocar.co.uk.
Available at: https://www.autocar.co.uk/car-news/industry/end-car-production-
australia-what-went-wrong [Accessed 22 Aug. 2019].
Why is Australia still protecting an extinct car industry? - MacroBusiness (2019). Why is
Australia still protecting an extinct car industry? - MacroBusiness. [online]
Macrobusiness.com.au. Available at:

10STRATEGIC MANAGEMENT IN NEW AUTOMOTIVE INDUSTRY
https://www.macrobusiness.com.au/2019/01/australia-still-protecting-extinct-car-
industry/ [Accessed 22 Aug. 2019].
Yunna, W. and Yisheng, Y., 2014. The competition situation analysis of shale gas industry in
China: Applying Porter’s five forces and scenario model. Renewable and Sustainable
Energy Reviews, 40, pp.798-805.