The Impact of Globalisation on the Automotive Industry - Literature review Example

Author’s name Instructors’ name Course Date 1. Table of Contents 1. Table of Contents 2 1 Executive Summary 3 2. Introduction 4 3. Overview of Automobile industries 5 4. Impacts of Globalization on Automobile Industry 6 5. Recommendations 8 6. Conclusion 10 7. References 11 1 Executive Summary The following paper analyses the impacts of globalization on the automobile industry. Globalization has both negative and positive impacts on economic performance of every nation as well as the various companies. The report starts with an introduction as well as an overview of the automobile industry. However, much emphasis has been put on the positive and negative impacts globalization. Further, recommendations have been provided on the st6eops that the industry could take to meet the emerging business trends. 2. Introduction According to Ijioui (2010), globalization is the continued integration of various markets into a competitive global market where countries pulls out from their detachments. Globalization has brought more collaboration between nations and corporation as well as industries. Companies and trading blocs have now been working in unity towards a common course (Alexander and Pickford 2010). The world has been turned into being a global village. This has tremendously reduced the distance and isolation of world destinations, which connects to various markets. It has led to the integration of labor and capital, technology investment and other factors that drive business. Globalization has been one of the most debated world topics of modern times. There have been groups who oppose globalization process while others see it as a way of unlocking potential of various markets in the world. These two groups have been emphasizing on the merits and demerits of globalization concept. Cavanagh and Mander (2011) contend that globalization has been both beneficial as well as having negative impacts on some industries in the world. It affects almost all areas of the world’s economy and at all levels. As a result, both consumers and business are affected. One of the industries that have been affected in one way or the other is the automobile industry. Automotive industry has grown massively since 1980s by having strong drive towards globalization. The inception of globalization has made automotive industry to become even more complex. This has come with far reaching consequences in future incense necessary measures are not taken into consideration. A good example of the effects of, globalization is the financial crisis, which affected almost every nation in the world. The result was that the global demand and production of automobile products in the entire world. The other perspective, according to Aldonas (2009), is that the automobile companies are forced to enter into new markets and therefore dealing with new policies and procedures of doing business. In addition, industries are forced to integrate strange import regimes that are expected to play both enabling and restrictive roles. Therefore, just like any other industry, automobile has been affected in various ways. 3. Overview of Automobile industries As noted above, automobile has been affected by globalization with future challenges likely to be experienced. However, automakers are doing what they can to ensure they come up with manufacturing and designing strategies in order to improve competitiveness as well as efficiency. Research by the IDC Manufacturing Insights indicates that automotive industry currently undergoing tremendous changes to cope with the emerging economic realities. The objectives of these changes are to ensure that demands and customer preferences are met by manufacturers and suppliers. Among the changes, include the incorporation of new technologies in improving the energy efficiency comfort while working as well as efficiency in production process (Heneric et al 2005). Further, study shows that there are no fundamental changes, which have taken place since 1913, when Henry Ford revolutionized the process of assembling, through creation of assembly line. Therefore, the process of globalization calls for changes in the industry in order to deal with challenges of the 21st century in the global manufacturing. 4. Impacts of Globalization on Automobile Industry As mentioned above, globalization has brought both positive and negative impact in various industries. Automobile has benefited directly, as well as indirectly because of globalization. One direct way is due to the diversification of markets across the globe. The scope of business coverage has increased tremendously. This means that suppliers of automobile products can reach many customers, as well as attracting new ones. The increased number of customers ensures that automobile products and services can be extended across borders. In addition, Ijioui (2010) contends that globalization has ensured there is interdependence among nations and world markets. This has made it possible to have increased interdependence among stakeholders in the automobile industry. The result is that companies can share different creative and innovative ideas on how to manufacture products and offer quality services to their respective customers. Various players can easily share their expertise in different process, which enhances service delivery. According to Crothers (2010), interdependence among nations has seen increased involvement of world institutions in solving economics and social issues affecting countries and which may affect how business is done. This intervention has been in dispute resolution among other issues. Among bodies involved, include the World Bank and the World Trade Organization. Therefore, international political and economic tensions have been resolved based on the rules based" approach. The interventions help to stabilize the business environment, which also favors the automobile industry. Crothers (2010) notes that globalization has also helped to fasten communication across the world. This has been necessitated by the development in the information technology which a vital role in ensuring that countries are sharing important information about the industry. Therefore, every aspect of the industry is affected positively by the ease of communication. Customers can get information about the existence, the price, and design of automobile products that they want (Rebery 2010). The industry players are able to share this information to the public, which increases their profit and customer traffic. Internet has played a great role in this front. Globalization has also assisted in opening the transportation networks in the world. Various business pacts have been signed among nations thus allowing entry of business in such country. Products and services can be moved faster to their destinations. Borders have been opened to welcome new investment and business established. The ease of transport has ensured that automobile manufacturers and suppliers can widen their scope and make customers enjoy their products and services in record time. Further, the opening up of countries’ borders among nations in the world has made some production processes cheaper. Automobile manufacturers are able to source raw materials where they are cheap. Therefore, the reduction of production cost also benefits suppliers as well as consumers or customers. However, some of the demerits of globalization to the automobile industry are that there have been so much of jobs outsourcing. Despite the establishment of businesses in foreign countries, skilled and experienced employees are placed in such nations to offer their services. Many of the developing nations where automobile companies have been established take up a good portion of these employees. In extreme conditions, the quality of management and production process is compromised. Ijioui (2010) observes that development of small automobile business or companies is affected. This is because there is a great and undelaying threat of big multinational companies to overpower the developing ones. According to Jerenz (2012), globalization has necessitated free trade and market freedom. This means that multinational companies take this to their advantage by monopolizing the market. Therefore, the growth of small and emerging companies becomes slow. 5. Recommendations The impacts of globalization to the automobile industry are not avoidable. The focus for the industry should be on how to cope with these changes. Here are some recommendations: The first step the industry needs to consider is to come with strategy of shifting from economy of scale to the economy of scope by focusing on the flexibility of manufacturing process and capabilities .This is because of the continued growth in the operational complexity, diversity of markets and increased consumer demands. Making such changes means that manufacturers will be able to meet the demands from customers as they intend to extend their scope of coverage in the world. According to Crothers (2010), Multinational automobile companies should ensure they develop ‘make anywhere, design anywhere and sell anywhere’ strategy. This will lead to global plant floor that will serve consumers from various regions in the world. The strategy will ensure that automakers are able to provide services and products depending on the market niche they are targeting (Jerry 2009). The supply chain of these products will therefore be ensured to consumers at any given time. Therefore, manufacturer and suppliers can ensure that they improve their portfolio-level planning and integrate design for capabilities in the design of future automobile products such as vehicles. The new changes that the industry intends to embrace cannot be fruitful without the incorporating of emerging technology as well as operating models. This should be emphasized especially in pervasive communication, mobile devices, programs and cloud-based architectures. This will go a long way in ensuring that proper foundation is built for powering of future assembly line. The automobile industry should also ensure that it copes with the personal mobility, which is becoming more different from one place to the other. The speed of mobility from world’s destinations is becoming a great concern among many consumers (Organization for Economic Co-Operation and Development 2005). Further, a good assessment of the world population and its dynamism, need to be carried out in order to understand its characteristic. This information determines the investment move that a company could take. In addition, there continued push by world bodies to ensure that there is reduction of emissions in order to tame climate change. This should be one of their agendas of automobile firms. This means that they will be integrating green energy in their product development, which meets environmental conditions. The development of such products means that these companies will become competitive in the global markets. The demands of various cu9stopmers from across the world will then be satisfied. 6. Conclusion As mentioned above, globalization has benefitted automobile industry in many ways. It has revolutionized the way this business is done. Despite the many advantages, there are several demerits as noted. Further, for the automobile to counter the new emerging ways of doing business there is need to develop strategies that will ensure that the industry integrates the new changes. 7. References Alexander, J. & Pickford C. (2010). Effects of globalization on manufacturing industries. London, Financial Times, Prentice Hall. Aldonas, G. D. (2009). Globalization and the American worker. Washington, DC, Center for Strategic and International Studies. Crothers, L. (2010). Globalization and American popular culture. Lanham, Md, Rowman & Littlefield. Cavanagh, J., & Mander, J. (2011). Alternatives to economic globalization a better world is possible. San Francisco, Berrett-Koehler. Ijioui, R. (2010). Globalization 2.0: a roadmap to the future from leading minds. Heidelberg, Springer. Jerenz, A. (2012). Revenue management and survival analysis in the automobile industry. Wiesbaden, Betriebswirtschaftlicher Verl. Gabler. Jerry, A. (2009). How automobile is influenced by globalization. Harvard Business School Cases, Business Source Premier, EBSCOhost. Heneric, O., Licht, G., & Sofka, W. (2005). Europe's automotive industry on the move competitiveness in a changing world. Heidelberg, Physica-Verlag. Organization for Economic Co-Operation and Development. (2005). OECD Handbook on Economic Globalization Indicators 2005. Paris, Organization for Economic Co-operation and Development. Rebery, M. (2010). The direction of automobile industry. Delhi, Prentice- Hall of India. Read More