Car Manufacturing in Australia - Case Study Example

GOVERNMENT BUSINESS RELATIONSHIP Name Institution Course Professor Date GOVERNMENT BUSINESS RELATIONSHIP Introduction The modern society is technology and innovation driven. The availability of technology realizes a new niche in the industrial sector that includes the innovation of products to provide a more competitive advantage (Ustun, Zayegh & Ozansoy, 2013, p. 15). There is no doubt that the car manufacturing industry is among the most affected where consumer demographic changes play a significant role in informing the decisions. Examining the case of Australia, the high population of car users attracts a significant number of manufacturers to the market, competing to tap the profitable market. The imperative is the innovation in the industry to include new models of electric cars, hybrid cars, and the vehicle to grid technology (Ustun et al. 2013, p. 15). However, much as external forces such as globalization and technology continue to shape businesses, these factors restructure the industry’s economy and market power which affects their performance (Callan & Bowman, 2015, p. 3). Therefore, the essay examines the case of car manufacturing in Australia, arguing that the government made the right decision to cut financial support to the struggling industry. Car Manufacturing in Australia Ustun et al. (2013, p. 16) describe the automotive vehicle situation in Australia where there is a high ratio of car ownership influenced by the insufficient public transport. The largeness of the continent together with the high population provides manufacturers with a stable and increasing market for the vehicles. Following the poor, expensive and insecure public means of transport, Australian population registers a high use of personal cars with at least 85% of the population own a car (Ustun et al. 2013, p. 19). Information in Figure below highlights on the wide-spread use and dependency on the vehicle for navigation in metropolitan Australia. The data supports the potential of car manufacturers in Australia as a viable market to introduce new technologies in the motor vehicle industries. The trends in car manufacturing industry in Australia present a case of continuous failure and relocation to the Asia countries following financial challenges in the face of dynamic economic structures (Soosay et al. 2016 p. 3; Armstrong et al. 2008, p. 343; Evans, 2013, p. 95). According to Soosay et al. (2016 p. 2), the survival of manufacturing firms depends on their abilities to cope with the external environment characterized by government regulation, change in consumer habits, competition, and technology. The ability to adapt to the changes follows a careful implementation of the strategy relative to the environment (Soosay et al. 2016 p. 3). In developing a strategy, Soosay et al. (2016 p. 3), considers the market, internal resources, and competitiveness of the firm. In the case of Australia, car manufacturers tend to implement a product-service system in the production stage as a means to stabilize their position in the global market. However, such a strategy poses the challenge of increased responsibility of the company to the public, especially regarding their abilities to provide quality products development through an advanced skill set (Soosay et al. 2016 p. 6). Armstrong et al. (2008, p. 343) identify the economic restructuring as a powerful influence towards the effective implementation of the strategies. In particular, economic patterns change the labor market resulting in the loss of employment, industrial decline, and growth. Such is the case of the Mitsubishi Company leading to the closure of its plant in Adelaide (Beer, 2007, p. 2). Explaining the reason for closure, Armstrong et al. (2008, p. 343) mention the lack of competitiveness of the industry amidst other well-performing sectors such as defense and mining. Moreover, the failure by the government to finance the falling company follows the assumption that the redundant employees will find employment in the new booming industries interpreting to a controlled labor market. William (2016, p. 1) notes the failure of car manufacturers to exploit the scale of economy as the primary reasons where companies such as Mitsubishi, Holden, Ford, and Toyota are closing their plants in Australia. Moreover, there is the problem of a too small a market in Australia following the features of the domestic market. According to William (2016, p. 1), the market carries the characteristic of an appreciating currency, high demands on wages by unions, and lowering of import tariffs and free trade agreements. These aspects of the Australian market fail to compete favorably with other regions, especially the Asian countries where labor cost are cheaper. Therefore, the companies opt to relocate their firms to other regions as a means to maintain the value of their product and earn profits in the competitive market. However, the closure of these companies results in a drastic loss of employment and skills of the workforce (William 2016, p. 1; Callan & Bowman, 2015, p. 7). Government Business in Australia The industrial sector depends on government policies to direct their operation and trading activities. The government also contributes a significant role in financing the operation of these huge investment firms as a means to ensure their support in employee training and development (Callan & Bowman, 2015, p. 21). Reaffirming the relevance of the government in the manufacturing industry, Beer (2007, p. 3) argues that governance is a central determinant of urban and regional development. The government ensures a collaboration of institutions through a hierarchical system of interactions following its level of federal, state, and local functions (Dowling, McGuirk & Bulkeley, 2014, p. 6). In this case, the interaction may provide both positive and negative outcomes. The imperative is the control of power between the policy makers and the organization in generating the desired result (Beer, 200, p. 3). According to Beer (2007, p. 3), governance in Australia is philosophical following a perception of the industrial problem without much input from an ideological perspective in designing an effective solution. Despite the philosophical approach, Beer (2007, p. 3) notes its significance in directing the development of Sydney. Focusing on the role of the government in the car manufacturing in Australia, Beer (2007, p. 8) provides a total of $AUS2 billions of investment from 2001-2005. The channeling of funds in the form of loans and grant by the Government of South Australia to the Mitsubishi Company was a strong initiative aimed at preventing its closure in the southern regions of the country. According to Beer (2007, p. 8), the provision of financial assistance to the company identifies the government as an economic and political body concerned with the success of its industries. In a similar argument, Beeson (2014, p. 266) identifies the relevance of the economic policies of Australia in affecting the relationship with other trade giants such as China. In particular, the foreign policies affect the position of Australia in the global market, whereby in structuring the policies, it not only has to consider the economic profits but also the security of the people and the political changes possible from such a move (Beeson, 2014, p. 267). Referring to the manufacturing industries, these policies are more pronounced through globalization and the signing of trade treaties and open trade policies that generate more competition between regions. Consequently, the entering into the market by developing countries threatens the position of developed nations such as Australia. Jason (2015, p.1) introduces the reasons behind the massive closure of car manufacturing industries in the Australia. The mentioned reasons include the high Australian dollar, free trade agreements, and tariff barriers that strip-off the economic power of the companies operating in these regions. The provided reasons agree with the writings of Porter (2008, p. 4) who provides a clustered way of analysis in the international competition. In particular, Porter (2008, p. 4) consider the operation strategies of the company, the operating environment, and the state of development as vital areas shaping the competition and success of a firm. The particular issues identify to greater challenges than the financial support by the government to influence the continued presence on these firms in the Australian soils. Geels (2002, p. 1258) introduces the dynamic nature of technology stating that the technological transitions influence the changes in other sectors to effect a positive application of the particular innovation. The challenge here is the reconfiguration process from an old system to a new one. Moreover, Geels (2002, p.1258), mentions of the difficulty in adopting anew technology since it depends on the development of new regulations, consumer attractiveness, and infrastructure which altogether require heavy investment. In this case, much as the technology continues to change the consumer behavior and discover new niches in the automobile industry, it is difficult for the government to channel adequate resources in such a dynamic environment with great uncertainty, especially in a time of global economic instability. Conclusion In summary, the car manufacturing industry in Australia attracts great advantages to the nation, especially the labor market. It is evident the closure of giant firms such as Mitsubishi in the region negatively impacted the employment sector, living a huge gap in the society. However, the imperative is the role of the government in ending a financial support to the firms following reasons that surpass financial constraints of the companies. In particular, the foreign policies, the technological changes, and the political spheres of the region influence the decision of the government to withdraw financial support. Moreover, since the firms failed to establish a stable operational environment, it becomes reasonable for the government to direct its finance in other well-to-do industries that provide it with financial and economic strengths. References Armstrong, K., Bailey, D., De Ruyter, A., Mahdon, M. and Thomas, H., 2008. Auto plant closures, policy responses and labor market outcomes: a comparison of MG Rover in the UK and Mitsubishi in Australia. Policy Studies, vol. 29, no.3, pp. 343- 355. Beer, A., 2007. Learning the lessons of Restructuring: Government and Regional Responses to Employment Loss in the Automotive Sector. Beeson, M., 2014. Issues in the Australian foreign policy. Australian Journal of Politics & History, vol. 60, no.2, pp. 265- 278. Callan, V. and Bowman, K., 2015. Industry restructuring and job loss: helping older workers get back into employment. Dowling, R., McGuirk, P. and Bulkeley, H., 2014. Retrofitting cities: local governance in Sydney, Australia. Cities, vol. 38, pp.18-24. Evans, H., 2013. Auto plant closures, policy responses and labour market outcomes: a comparison of MG Rover in the UK and Mitsubishi in Australia. The Impacts of Automotive Plant Closure: A Tale of Two Cities, p.95. Geels, F.W., 2002. Technological transitions as evolutionary reconfiguration processes: a multi-level perspective and a case-study. Research policy, vol. 31, no.8, pp. 1257- 1274. Jason, D., 2015. Who killed the car industry? [online] Available at: http://www.smh.com.au/business/the-economy/who-killed-the-car-industry-20151112-gkx1c8.html [Accessed on 26th Apr. 2017]. Porter, M., 2008, January. Clusters, innovation, and competitiveness: New findings and implications for policy. In Presentation given at the European Presidency Conference on Innovation and Clusters in Stockholm. Soosay, C., Nunes, B., Bennett, D. J., Sohal, A., Jabar, J. and Winroth, M., 2016. 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