Holden Automobiles - Case Study Example

HOLDEN AUTOMOBILES Name: Institution: Date: Introduction Holden is a reputable automobile manufacturer headquartered in Australia. Holden was founded in 1856 having been started as a saddler business and was initially located and doing business in South Australia. Currently, Holden has risen to become one of the seven well-cherished GM operations that are involved in designing, manufacturing, and selling automobiles not only in Australia but globally. Today, the company has designed and manufactured a total of 42 automobile models covering a wide range of customers and demand. Holden has a diversified product portfolio, and its models have a desirable performance and quality engines representing some of its major strengths and the ones that have elevated it above its major Australian and global competitors. Holden has also greatly diversified its services ranging from distribution of automobiles, engines, components, and parts and manufacturing of the same. Holden is subsidiary to General Motors Company, which has its headquarters in Detroit, Michigan. Although Australia represents just a small portion of the world automotive production, Holden’s trained designers are well recognized around the world because of their creativity (Holden 2016). Holden primarily produces vehicles, including designing, manufacturing, and marketing cars, trucks, and automobile parts not only in Australia but the whole world. Holden is one of the companies used by General Motors to market its products. One of the greatest competitive advantages for Holden is its strong brand portfolio, and this gives it the most significant advantage. However, Holden has been facing an increasing challenge due to the sustained decline in light vehicle sales due to weaknesses in the prevailing economic conditions in the United States and the increasing durability of vehicles. These two conditions have added much pressure on the overall performance of Holden. PESTLE analysis represents one of the tools for assessing the external environmental factors that influences a business organization, including factors such as political, socio-cultural, economic, technological, environmental, and legal (Gupta, 2013; Frederic, Vandome & McBrewster, 2011: Robert, 2006). Political Australia is a liberal-capitalist democracy. This means that the state has to keep on interfering with the economic systems via various roles. For example, the parliament has the power to impose taxes on importations with an aim of protecting the domestic organizations. The parliament also has the power to formulate environmental protection laws with an aim of protecting the Australia’s natural heritage. Environmental Australia acts as a role model to the world’s driest areas to the extent that these areas look at how Australia looks after its water. However, Australia has not been very good in controlling the effects climate change. As a result, Australia in replacing fossil fuels with renewable powers such as the wind, marine, and solar among others. Socio-cultural Socio-cultural factors represent practices, beliefs, customs, and behaviors existing within a group. These factors significantly influence the global business environment. Australia is composed of a diversity of communities dwelling in a moderately young population. Australia does not have an official religion with all the existing religions fairly sharing. Australia is also significantly witnessing an increase in the level of education. Different cultural groups are getting assimilated into the dominant British-Australian traditions. The dominant factor that has determined the national culture in Australia includes the female population which is relatively small compared to that of men. This culture has laid the basis for the dominant ideology of mateship (Page, 2002). Multiculturalism characterizes Australia with English being the primary language used. The Australian laws allow all Australians to express their beliefs and culture freely and freely participate in the national life. Technological Technological factors refer to factors that give organizations technological capabilities, including automation, research and development activities, technological incentives, and the intensity in which technological change occurs. The government of Australia significantly funds research and development initiatives. In the financial period 2010-2011, the Gross Expenditure on R&D for Australia was $30 billion. The government has several funding programs and grants that are aimed at assisting Australian business organizations to develop and commercialize their IP (Daley, 2013). Legal Australia has a very flexible business law which makes the process of running a business organization easy and simple. Economic There are various economic factors affecting business organizations in Australia, including interest rates, consumer confidence, employment, and inflation. Australia represents one of the world’s main capitalist economies. The most dominant sector in Australia is the service sector whereas the Australian economic growth is highly dependent on agricultural and mining sectors. The economic conditions of doing business in Australia are very attractive. Australia is ranked tenth in the “ease of doing business index”, it has experienced constant economic growth, contained inflation, low rates of unemployment, low public debt, open market with minimal restrictions, and strong and stable financial system (Trading Economics, 2016). SWOT Analysis SWOT is an acronym representing Strength, Weaknesses, Opportunities, and Threats facing an organization. SWOT analysis represents the method through which organizations review their strategic condition (Hill & Westbrook, 1997). It is assumed that a good strategy will derive from a good fit between the internal resources of an organization and its external situation. For a company that wishes to stay ahead of its competitors, it has to maximize its strengths and opportunities while minimizing its weaknesses and threats. Such an assumption may seem simple; however, if accurately applied, it can bring great benefits for the organization, including giving the company a competitive advantage, increasing organization’s revenues, and complete elimination of weaknesses among other benefits (Jackson, Joshi & Erhardt, 2003). Holden’s SWOT Strengths i. Strong brand presence and the Middle East’s market share The Middle East represents the largest vehicle export market for Holden. Some of the favorite GM’s models among the Middle East consumers include V8-powered Chevrolet Caprice sedans (long wheelbase) and the Chevrolet Lumina sedans. Holden has gained much popularity among the Middle East fans because the Aussie brands are known to be high performance, especially in their racing activities. ii. General Motors provides a strong backing Holden is one of the companies that General Motors uses to market its automobiles; therefore, it has to offer strong backing for it to enable it to have a strong financial base for its survival. General Motors gives much support to Holden because it represents one of the most flexible plants among all the General Motors plants. As a result, GM finds that Holden can meet stringent export requirements. GM has invested over AU$500 in upgrading the Holden plant because of its ability to overcome such challenges. iii. Strong domestic market Holden manufactures some of the most popular automobiles both in Australia and New Zealand. The company targets both the upper and middle-class individuals manufacturing strong and reliable high-performance automobiles. Holden has improved its brand legacy since it was founded in 1856. Other sources of strengths include experienced business units which have been operational for many decades and skilled workforce. Weaknesses i. Smaller Global Market Share Globally, Holden market share is small compared to other automobile manufacturers. ii. Brand portfolio Holden’s brands are only strong regionally (Australia and New Zealand). Opportunities i. New Products and Services The Chevrolet/Holden Volt seems like a product that will bring significant opportunities regarding sales. ii. Growing demand Holden has been operational for more than 120 years and throughout this period; the company has built its brand. The company has continued to target wider markets to promote its brands. Its marketing initiatives have reached to regions such as the Middle East where some of its brands have significantly gained fame making demand for these brands increase rapidly. iii. Income level is a constant increase Over the years, the revenues for Holden have continued to rise gradually and constantly which makes the company able to sustain its production, R&D, and marketing initiatives. Consequently, the company has been able to build a strong capital base which will continue to enable remain competitive. iv. Innovativeness Holden is known worldwide for its innovativeness. The company trains and hires staffs that possess high innovative capabilities and this will make the company have a greater ability to develop new products and introduce them to the market with great success. These staffs have very innovative car ideas compared to those of its competitors. Threats i. Price changes Automobile manufacturers around the world are increasingly adjusting their prices downwards to target the middle-income earners who do not have the ability to purchase high-priced models. As a result, the automobile industry has become very competitive with many of Holden’s competitors highly focusing on low prices. If this trend persists, it is likely to pose a significant threat to Holden’s innovative products. ii. Increasing costs The company has been experiencing high R&D, production, and labor costs due to the increasing size of the company and increasing costs of raw materials and energy prices. iii. Tax changes and Government regulations The government of Australia also conducts regular tax reviews, and upward tax reviews are likely to increase Holden’s cost of production. iv. Growing competition and lower profitability Automobile manufacturers around the world are significantly engaging in research and marketing initiatives. v. Brand portfolio Holden highly depends on revenues from automotive brands generated by more than 68 percent of the company’s sales. In case that the automobile market experiences a downturn, the revenues for the company are likely to be highly affected. Competitive Analysis Holden operates in three industries, including the automobile manufacturing, the automobile parts manufacturing, and the transportation equipment manufacturing. The company’s main competitors include Honda Motor Company, Ford Motor Company, and the Toyota Motor Company. These are Holden’s most significant competitors. Ford poses significant competition for Holden about the range of automobile models. Ford manufactures models and brands such as the Ford Mustang, Ford Focus, Fiesta, Taurus, the F-Series pickup, and Lincoln. Ford has over 65 design and manufacturing plants around the world. The company mounts significant competition in the North American market which accounts for a large number of its sales (68 percent) (Hoovers, 2016). The Toyota Motor Corporation Australia Limited is located in Port Melbourne, Victoria. Toyota poses significant competition within Australia manufacturing a wide range of models, including commercial and passenger transport vehicles such as Land Cruiser 70 and 200 series, Toyota Corolla, Prius, Aurion, and Camry. Like Holden, Toyota also markets its automobiles in the Middle East. Therefore, there is geographical overlap in the products offered by Holden and those offered by Toyota Limited. However, strategically, Holden’s models are highly valued about Toyota’s models. Strengths versus Opportunities There are several strategies that Holden can use to pursue opportunities that will align with its strengths. Holden should maximize its competitive advantage (innovative capabilities) to manufacture new innovative automobiles (Pickton & Wright, 1998). Such innovative models can help Holden stay ahead of its competitors regarding market demands. Bibliography Daley, J. (2013). Australian Government Spending on Innovation March 2013. Grattan Institute. Retrieved from https://grattan.edu.au/wp-content/uploads/2014/05/901_daley_alliance_21.pdf Frederic, M., Vandome, A. & McBrewster, J. (2011). Pest Analysis. VDM Publishing. Gupta, A. (2013). Environment & PEST Analysis: An Approach to External Business Environment. International Journal of Modern Social Sciences, 2 (1), 33-43. Hill, T., & Westbrook, R. (1997). SWOT analysis: it is time for a product recall. Long Range Planning, 30(1), 46-52. Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational diversity: SWOT analysis and implications. Journal of Management, 29(6), 801-830. Page, J. (2002). ‘Is Mateship a Virtue?’ Australian Journal of Social Issues. 37(2): 193-200. Pickton, D. W., & Wright, S. (1998). What’s SWOT in the strategic analysis? Strategic Change, 7(2), 101-109. Robert, M. (2006). The New Strategic Thinking: Pure & Simple. New York: McGraw-Hill. Trading Economics (2016). 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