Performance of the UK Motor Industry - Literature review Example

? Business Literature Review Table of Contents Table of Contents 2 Performance of the UK motor industry 3 Introduction 3 UK auto industry: sector overview 4 Facts about the automobile sector of UK 5 Performance of the Auto Sector 6 2.Causes of downsize/closures of the Ford and Honda’s depot 7 3.Future direction of the UK Motor Industry 9 Reduction in carbon dioxide emission levels 9 Focus on fuel efficiency 10 Research and development on the lines of low carbon technology 11 Increase in support from the government 11 Research Questionnaire 12 1. Performance of the UK motor industry Introduction In the present days of today’s modern society, the global masses, located in various corners of the world are living in a state of high dependency as well as extreme inter relativity. The rapid advancement of communication technology along with the faster evolution of various kinds of technological gadgets have played a massive role in promoting interconnectivity of the various markets that are located in various corners around the world. Because of this superior level of internet sponsored network connectivity, the world has become a highly connected one single global entity. It is highly interesting to mention that the level of dependency that exists in between the organizations and business forums of various countries and markets is widely varying and largely diversifying in nature. As of the recent times, the advanced markets located in the well developed economies are facing factors of low demand because of the influence of a wide range of macroeconomic factors like the slow growth in the economy and fall in purchasing power of the consumers. It has become a common and normal trends for the companies and organizations located in the regions of slower growth to look forward to the markets of emerging economies like Africa, china, Russia, Brazil and India so as to secure their growth lines of the future (IMF Research Dept, 2012, p. 7) . The UK motor segment forms a very crucial and critical part of the entire motor industry of the European region. The factors like product manufacturing, combined participation and sharing of manufacturing policy by the auto manufacturers as well as the multiple markets served in a combined basis by the entire European automobile sector makes the contribution of the UK motor industry very important. It also has to be taken into account that the production of the automobile sectors in the UK region contributes in a positive manner in the economy and society of the nation (Johnson, 2002, p. 164). UK auto industry: sector overview It is highly relevant to mention that the most of the nations of the European region is facing extended periods of macro level economic challenges in regards to the troubles of the Euro zone. Since the UK motor industry shares a high degree of contribution based dependence with the entire European motor industry, it is very natural that the potential influence of the regions’ macroeconomic challenges is bound to cast a shadow on the prospects of the UK automobile sector. As of October 2012, various reports on the automobile sector of the UK region hinted to the fact that around 1400 workers of the motor sector is about to lose their jobs as a result of cuts that are supposed to be initiated by the motor manufacturing giant Ford in its plant locations of Southampton and Dagenham. Further insights revealed that the job cuts in the motor sector is an outcome of Euro zone powered effect which comprised of uncertainty in the business environment as well as erosion in demand. It was also realized that Ford has focused on consolidating its manufacturing operations in the European region on the strategic grounds, while trying their best to absorb the case of depreciating demand of finished products from the European region. Talking on the lines of impacts and threats faced by the automobile sector of UK, it has to be said that the automobile sector faces serious issues on the lines of rising cost of manufacturing in the UK region as well as highly competitive and cheap foreign labor. While talking in regards to the closing days of the year 2012, it has to be said that the automotive sector of UK has made some significant achievements. Talking on the same lines, it is important to mention that the automobile sector of the UK region played significant roles in regards to becoming the second largest market for new cars in the European region. Also, the sector achieved an increase of 10% in regards to vehicle production as compared to the previous year. This also helped the entire nation in a great way to survive the double dip recession that impacted the well developed markets around the world (SMMT, 2012). Talking from the statistical point of view, it is important to highlight that the automotive sector of the UK region has an annual turnover of around 55 billion pounds. Above forty automobile companies of the global level conducts their operation in the market of UK, which provided employment to around 700,000 people as of the year 2012. Also, talking on the lines of growth achieved by the UK automobile market, it can be mentioned that the UK market has achieved a steady growth rate since March. Also, the majority of the vehicle and engine productions that has happened in the UK region in the automobile sector have been exported to the foreign markets. The Society of Motor Manufacturers and Traders has predicted that the UK market is bound to attain forecasted growth on the number of vehicle registrations by the year 2013 by around 0.1% (Hudson, 2012). Facts about the automobile sector of UK Talking on the lines of interrelation and contribution made by the auto industry of the UK region to the national economy, it has to be said that the automotive sector of the UK region contributes to around 3% of the total gross domestic product (GDP). It also has to be said that the total turnover from manufacturing of automobiles contributes to around two third of the total economic output of the automobile sector. The average turnover of the UK automotive sector is estimated at around a little over 50 billion pounds. The sector comprising of automobile exports contributes to around 10% of the total exports from the UK region. Talking in regards to investments that is supposed to be made in the lines of research and development of the automobile sector, it has to be said that the automobile sector of the UK region spends around 1 billion pound on an approximate amount (SMMT, 2013). Performance of the Auto Sector Talking in regards to the performance of the auto sector, a wide range of information needs to be provided. It is of considerable importance to mention that since the UK based automobile sector is related and integrated with that of the European region, it is expected that the domestic business prospects of the automatable sector of UK is bound to get impacted because of the European region. However, the trend analysis of the automotive sector of the European as well as the UK region revealed a interesting phenomena. Talking on the lines of car registration, it has to be said that while the registrations for new car fell by around 8% in the European Union, the same attained a rise of over 5% in the UK region. Talking in a more specific manner, it has to be said that while the European automobile industry is facing issues of weakening demand, overcapacity as well as consumer job cuts and pay freeze, the focus is getting more and more shifted on the UK markets. In the UK markets, the dealer networks along with vehicle manufacturers are providing attractive deals to the masses, which is automatically attracting as a magnet for luring back the customers. This is helping in powering strong demand of automobiles in the UK market (Rowley, 2013). Talking on the lines of export statistics of the automobile market of UK, it has to be said that the focus is largely on the lines of jump in export that happened between the year of 2011 and 2012. It has to be said that the growth rate of around 8 percent in exports in the last year along with positive domestic market based outlook has resulted in the process of growth in production amounting to 1.58 million vehicles on an annual basis (Roland, 2013). It is also of high relevance to mention that the growth of output in the car market of UK has been achieved, despite the shortening of the automobile market in the regions of Europe (Monaghan, 2013). It is highly important to mention the fact that the application of various incentive powered deals is playing a major role as a catalyst on the lines of increasing the sales of the new cars in the UK market in the current year of 2013. Talking more on these lines, it has to be said that the multiple schemes which comprised of incentive issues like exchanging old cars for new ones, providing a 2000 pound grant to the consumers which is partly funded by the government as well as the industry helped in a great way in increasing the number of car registrations in the month of February of the current year. As per data collected from Society of Motor Manufacturers and Traders, it has been found that the total number of registration for new cars exceeded over 66,000 because of strong spike in demand from the consumers located in the UK region. It also has to be said that the global car manufacturer Ford has the largest amount of market share amounting to around 15% (Monaghan, 2013). It has also been predicted that the registration for new cars is bound to grow at the rate of around 2.05 million in the present year and around 2.6 to 2.11 million vehicles in the year 2014. Talking on a summarizing note on the lines of performance, it has to be said that the entire car industry of the UK has performed in far better terms as compared to the automobile market of the European region (Monaghan, 2013). 2. Causes of downsize/closures of the Ford and Honda’s depot It is of high importance to take into consideration the fact that the nation of UK forms a critical part of the entire European automobile sector. In the recent times, the performance of the markets of the entire world, which comprises of both the developed as well as the developing markets are largely influenced by the global multiple macroeconomic challenges. It can be relevantly mentioned that the sovereign debt crisis of the Euro zone, which has created a large influence on the economic prospects of many European nations is significantly sending deep impact shock waves to various shared industries that are located in the various part of the world. As a result of various negative impacts on the economies of multiple European nations, it can be said that the growth rate of the European economies is staggering in the recent times. While the factor of stalling or shrinking of economic growth rate is resulting in job cuts and pay freezes, it is seriously downplaying the purchasing power of the masses. This is in return creating low demand in the market thereby impacting the overall industrial output of the European economies. Faced by the numerous economic challenges in the European regions, various automobile manufacturers have concentrated on the process of restructuring their business organizations for the motive of cutting costs and taking care of losses. In the beginning of the current year, the global automobile manufacturer Honda has announced the plans to downsize its work force by as much as 25% (Duckworth, 2013). Needless to say, that this massive job cuts will automatically result in the process of wiping out of 800 jobs in the Swindon plant in UK. Talking on the lines of the reason for the job cuts, it has to be said that the sole focus of Honda was to cater to the automobile needs of the consumers of the European markets like Italy, Greece and Spain (Robinson, 2013). Faced with the issues of low demand, Honda had to restructure its operations for stemming losses. Apart from Honda, the popular automobile company, Ford is also looking forward to cutting down its loss generation by shutting down at least three assembly and automobile parts manufacturing factories. Being faced with falling sales in the European regions as well as mismatch of supply and demand, the company has focused on applying its cost cutting tactics (Vlasic and Jolly, 2012). Analysts reveal that the process of shutting down of the factories, which has its presence in UK and Belgium, will save the company of around 500 million dollars over the next two years (Cauchi and Ramsey, 2012). 3. Future direction of the UK Motor Industry While talking about the possible future trends of the automobile sector of the UK market, it has to be said that a large number of factors has to be taken into consideration. The factors are largely diverse in nature. Reduction in carbon dioxide emission levels The most primary factor that will be highly influential in shaping the upcoming direction of the UK motor industry is the factor of increase in pressure in regards to fast reduction of carbon dioxide emissions from the vehicles by the government as well as various social pressure groups in regards to environmental concern. The increase in pressure in regards to curtailing of carbon dioxide emissions will automatically lead to the process of increase in investments by automobile companies for the purpose of developing vehicles and automobiles that are friendlier towards the environment. It is highly relevant to mention that the figure provided above displays a steady fall in average levels of carbon dioxide emission over the past couple of years. Hence, this makes the process of achieving a reduction in carbon dioxide emission, an evolutionary and economically possible concept rather than a revolutionary motion (Cooke, n.d., p. 103). Focus on fuel efficiency While the manufacturing of the automobiles in the UK region increases, significant amount of focus is given on the fact increasing the fuel efficiency of the vehicles. As per the data collected in the recent times, it has been found that the fuel consumption in the UK regions has fallen by almost 20% over the last five years. Further analysis for the fall in fuel demands highlighted the fact that the rise in fuel prices along with the evolution and manufacturing of various fuel efficient engines and automobiles are the main factors which contributed in a great way (BBC, 2013). It is very important to mention that the fall in demand of fuel is automatically triggering the fuel prices. As a result, in the near future, it is highly likely that the focus by the automobile manufacturers of the UK region will be to produce more on the lines of fuel efficient automobiles, which will consume significantly less amount of fuel. Also, by focusing on the process of fuel efficiency of the vehicles and automobile engines, the UK automobile industry will be actively pursuing on lowering the carbon emission levels for the automobiles (Murray, 2013). Research and development on the lines of low carbon technology It has to be increasingly taken into account that the automobile companies of the UK region spend a considerable sum of money on the lines of research and development. However, in the upcoming times of the future, the automobile companies will be focusing in a great way on the lines of manufacturing of more energy efficient automobiles which will also be providing low amount of carbon dioxide emissions. Hence, it can be logically considered that the UK based automobile manufacturing companies will be focusing on the research and development of low carbon technology, which will provide significant amount of advancement to the entire automobile sector of the domestic as well as the export markets (APMG, 2011, p. 5). Increase in support from the government It is of high importance to mention that the entire UK market provides a very healthy environment for automobile production. Talking in regards to statistical data, it can be said that the 40 global automobile manufacturing firms is being supported by around 3300 ancillary firms. This helps in a great way in boosting up the national car production for the UK region and thereby ends up in the process of contribution of 2.5% of the total global production of automobiles. It is highly important to mention that various renowned manufacturers like BMW, Jaguar Land Rover and Nissan are planning to boost up production in the UK region because of the favourable environment provided by the government of the UK region (Epsilica, 2011). Hence, it can be expected that the support from the government is expected to increase in the years to come. Research Questionnaire 1. What is the sex of the respondent? a. Male b. Female 2. What age group does the respondent belong to? a. Between 18 to 23 yrs. b. 24 to 30 yrs c. 31 to 36 yrs d. 37 to 42 yrs e. Above 42 yrs. 3. Which company were you working for? 4. Was your last job was with Honda or Ford? a. Honda b. Ford. 5. Have you worked in both the companies? a. Yes b. No. 6. Which category did your job role belong to? a. Mechanic b. Shop Attendant c. Junior Level Manager d. Middle level manager e. Senior Level manager. 7. When did you lose your job? a. Less than 3 months b. Between 3 months to 6 months c. Between 6 to 12 months d. More than a year. 8. What do you think is the main reason for losing your job? a. Downturn in global market b. Triple dip recession in the UK market c. Fall in car demand in the European Union d. Slowdown in the emerging and new potential car markets e. fluctuations in gas prices 9. Do you think that the problems in the Euro Zone share a connection with the UK automobile sector? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 10. Do you think there is a fall in consumer demand in regards to the Euro zone crisis impacting the European nation? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 11. Do you think there is any relation between the fall in demand for automobile in the European markets and the current crisis in the UK automobile sector? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 12. Do you think there is any relation between the fall in demand for automobile in the European markets and the current job losses in the UK automobile sector? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 13. Do you think that the pricing of Honda’s automobiles acting as a barrier for its sale in the European region? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 14. Do you think that the pricing of Ford’s automobiles acting as a barrier for its sale in the European region? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 15. Do you think Honda should have changed its strategic focus from the struggling European markets to other markets? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 16. Do you think Ford should have changed its strategic focus from the struggling European markets to other markets? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 17. Do you think that the UK car market will be able to pull itself out pretty fast from the currently ongoing crisis? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree 18. Do you think that the closure of the manufacturing units as well as the loss of jobs in Honda and Ford going to impact the economy of the UK nation? a. Strongly Agree b. Agree c. Neither Agree nor disagree d. Disagree e. Strongly Disagree Reference Epsilica, 2011. 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[Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/industry/9809738/UK-car-exports-at-all-time-high.html [Accessed 10 April 2013] Read More