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The Global Car Industry Case Study - Essay Example

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In the paper “The Global Car Industry Case Study” the author discusses the barriers to entry in the global car industry, which are high due to high costs of initial investment, required aggressive marketing strategy to combat incumbents, and required high costs of research…
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The Global Car Industry Case Study
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Download file to see previous pages In developing countries, governments are seen to strongly favor the development of the car industry as it generates revenue through taxes and employment. China and India's political sectors are seen to expand their infrastructure in order to support industrialization and the higher demand for durables such as cars. However, in industrialized economies with population having larger purchasing powers, governments are more concerned with the pressing issues of sustainable development and environmental preservation.
Economic: The difference in the economic situation of various nations will be having different effects on the markets of the global car industry. The United States is forecasted to outpace the Euro Zone in terms of economic growth while the whole Asia Pacific will be experiencing robust growth except for Japan. In general, it should be noted that "growth and wage levels are expected to be slower in the real terms in the immediate future." This, in turn, can lead to low consumer confidence which is expected to suppress demand for new cars while encouraging the retention of old ones or turning to the second hand market. This bleak outlook is even coupled with the fact that most countries are employing tighter policy measures which squeezes the consumers' disposable income through higher taxation schemes.
Social: One of the social factors which have a high impact in c...
However, this level of nationalism is expected to be eroded by the subsequent increase in education, travel, and integration.
Technological: Technological developments have greatly contributed to the improvements in process, design, and efficiency of car manufacturers. It is expected that technological innovations in the global auto industry will focus on reducing the environmental hazards and pollution caused by emissions. Fuel cell technology will also become the most important issue for car manufacturers. The widespread use and popularity of using robots in production will also affect the labor preference of auto makers.
Environmental: Environmental issues are increasingly becoming important in the decisions and operations of car manufacturers worldwide. It is expected that environmental concerns will force automakers to concentrate their efforts in producing cars with less emissions.
Legal: Currently, there are no legal issues and concerns faced by the global car industry. However, it can also be expected that automakers will be faced with the issues of sovereignty in light of the increasing globalization.
5-Forces Model of Competition
Barriers to Entry/Exit: Moderate
The barriers to entry in the global car industry are high due to high costs of initial investment, required aggressive marketing strategy to combat incumbents, and required high costs of research and development. However, this is balanced by the encouragement of the foreign direct investments in major markets like China and India through fiscal incentives. In Russia, the barrier to entry is quite high because of the policies put in place by the state. 
 
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