Chevrolet: Economic Perspective - Research Paper Example

?Chevrolet: Economic Perspective Chevrolet: Economic Perspective Introduction Automobile industry began to take shape in early 18th century (Boschma & Wenting, 2007). However, at that time the cars were simple, even some of the early models went on without engines, therefore, people used to push them around. Nevertheless, when time passed the automobile technology became more complex and in 1914 the first car engine was introduced by Sir Henry Ford. From this point onwards vehicles started to develop with the speed of light. Ford Company played a significant role in causing innovation in the field of cars and other mechanized vehicles. Automobile industry is the practical application of human dream of convenient travelling (Fortunato, 2009). Therefore, automakers try to transform the car into a travelling solution within certain price limitations. On the other hand, inflation and rising taxation are causing significant hindrance in the process of innovation in international automobile industry. Moreover, Ford inspired its rivals to extend their production level in order to compete successfully (Boschma & Wenting, 2007). Thus, in this way, Ford acted as a pioneer of automobile innovation. With the passage of time US automobile industry became saturated, which helped companies like Toyota, Chevrolet and others initiate their operations in the country. It is important to note the real nature of the industry was quite luxurious because in old times vehicles were considered as something unique and specifically designed for the elite class. As the overall cost of the automobile companies dropped significantly in the past few decades, therefore, cars transformed into utility products in developed nations. On the other hand, the image of the car as luxurious item stood the test of time in developing countries. History of Chevrolet Chevrolet initiated its business a century ago and its cofounders were William Durant Louis Chevrolet (Catalan, 2010). Both of the entrepreneurs were previously working in the business of horse driven vehicles therefore, consented to experiment with cars powered by engines in 1912. Thus, Chevrolet modernized the entire industry through introducing petrol engines, which replaced the old-fashioned steam engines and horses as well. Along with this, Chevrolet continued its innovation by introducing new model from the decade of 1920 to that of 2000. Therefore, Chevrolet’s commitment to excellence is persistent for a century and the company is still in the process of innovation. Status of the Automobile Industry Automobile industry is the most expensive one in the category of consumer products. Therefore, the process of innovation in this particular industry is the highest as well. Due to this reason, automobile firms previously engage in hiring the best minds in all fields entailing from engineering to management sciences. Automobile industry is not hiring substantial number of employees in recent years (Fortunato, 2009) because it relies on high-end technological production units, which minimized the employee requirement in the industry. Strategic recruitment became a norm in international automobile industry. Along with these factors, semi-permanent recession forced various automobile companies to downsize in recent years. On the other hand, organizations are pressing on the need to control the waste, which will definitely increase the quality of the products produced. Furthermore, automobile companies are heavily taxed in order to keep refrain them from taking undue price advantage in developing companies. Therefore, pertaining to this fact automobile industry plagued with the tendency to downsize during the period of last decade. However, Chevrolet enabled itself to demonstrate a significant rate of growth in past years given the nature of operational circumstances of the industry. The prime reason of this development attributed from design and model enhancement continuation at Chevrolet (Catalan, 2010), which in turned kept its product appeal meaningful and attractive to the customers in the past few years. Additionally, able strategic management caused sales of the company to expand in various countries of the world. Along with these factors, Chevrolet kept on hiring creative individuals in order to fuel its quest for innovation in the most testing times in 2000s. In the light of this argument, the importance of creativity and dedication played an important role in causing the growth in the ranks of Chevrolet. In parallel, the role of customer care and market research department launched an online survey system, in order to intake their feedback. Additionally, the production department took effective but minute steps in enhancing the design of the product thus, in this way Chevrolet enabled itself to enhance customer satisfaction. Demand and Supply of Chevrolet Comoro Chevrolet introduced its new model of car in 2007 and surprised the world because, at that time, none of the competitors was able to establish significant innovative culture because of recession and downsizing (World Bank, n.d.). Chevrolet retained its employees through cutting the operational costs therefore, enabled itself to sustain the worse jolt of international recession. On the other hand, when other companies engaged themselves in downsizing, Chevrolet kept on hiring increasing number of employees during the period of recession. In this way, Chevrolet expanded its product line when others were concentrating theirs. Based on this discussion, the hazardous effects of recession and growing internal costs caused global automobile industry to shrink in terms of new product development. At the same time, these factors of rising costs caused a significant dent on the ability of automobile industry in terms of benefiting the society. Chevrolet arranged training for cab drivers in US in order to upgrade their skills, so that they can earn legitimately in America. Therefore, the role of Chevrolet remained significantly in past years in causing poverty alleviation in middle class of US. Nevertheless, Chevrolet is facing a daunting task of fulfilling 25000 urgent orders of Comoro in the latter quarter of 2012. The company managed to withstand the overwhelmingly high level of demand in the early stage of the current year, which mounted up to five figures. Along with this, the company is witnessing a persistent growth of 10% in terms of demand of Comoro in the past 3 years. Market Structure Chevrolet is the subdivision of GM and is operating under the mixed market system of US for a century (Boschma & Wenting, 2007) now because American market is the most promising market for its products in the past years. Therefore, Chevrolet invested significant amount of financial resources in building its infrastructure in America. Along with the substantial amount of investment, Chevrolet also supported its struggling units in south Asia through diverting its profits from US. Thus, Chevrolet will not be able to abandon its US operations despite challenging economic conditions. Price Elasticity of Chevrolet Camaro Camaro is considered as a luxury in most developed countries in the world because, in those nations transportation infrastructure in adequately developed. Therefore, people are less interested in purchasing their own vehicles. Nevertheless, people of developed nations are more concerned in investing in the academic future of their children. At the same time, developing nations do not import these kinds of luxury cars because of low buying power in the society. Therefore, Camaro’s price elasticity in term of influencing its demand is high. In this way, only elite class of the world are considered as the most loyal customers of the Camaro worldwide. Competitor Analysis Production Levels Source: slideshare.com In the light of this graph, Toyota is in lead in terms of production volume in the past three available years. However, recent retrenchment activities of GM will be expected to payoff in terms of increased production volume. GM is also attempting to control its production in order to minimize the possibility of overproduction, inventory handling and overspending. Thus, through saving all of these costs, GM may be retaining highly talented employees by offering them excellent pay packages. Source: worldbank.com This graph represents a consistent reduction in share prices of GM with reference to persistent growth in US GDP rate over the period of past 3 years. This trend can be presented as the evidence of negative impact of raised taxation on stock prices of GM. In the light of this argument, the reduction in net profit of the company can also be implied. Therefore, there is sufficient evidence that US government is attempting to deliberately lower the supply of money in the local economy in order to stabilize the value of dollar against that of other leading currencies in the world. Findings Findings of this research effort are very significant in terms of managerial decisions of General Motors because, these findings highlight the inability of GM to produce sufficient inventory in comparison with the competitors. However, absence of adequate inventory caused customer satisfaction to drop significantly during the past few years for General Motors. However, on the other hand, GM was able to retain talented employees, who are fueling the process on intra-innovation for the organization under study. In parallel, rising taxation rates in the US are causing a vast scale reduction in the stock prices of GM, which is an effective indicator of net profit reduction for GM in recent past years. However, US acted as a favorable market for GM’s product Chevrolet, which covered the substantial proportion of sales. Therefore, it is ill-advised for the company to roll back its operations in US. Conclusion The first automotive of the world was designed by the Ford company in 1914, after that innovational speed of this industry remained exceptional in the following years, when more and more organizations enter into it. Nevertheless, with the substantial amount of investment required for entry, recently suffering automakers cannot abandon their operations. Therefore, industry is plagued with lowering incomes. Along with this, rising taxation is also playing a notable role in causing a dent in the profitability of automobile industry. Additionally, the limiting ability of GM to cover the orders of Chevrolet is causing customer satisfaction to drop in past years. However, GM is also able to substantial amount of ordering, holding and transportation cost in order to enhance the net income. Thus, this managerial decision of cost control is assisting GM in retaining talented employees. Based on the data, which is analyzed during the development of this paper, it can be established that GM is the second best automotive company in the world in terms of production and profitability. Furthermore, GM is operating adequately well in the macro-environment plagued with inflation and uncertainty. But, effective strategic management is causing GM to innovate in times of recession. References Boschma, R., & Wenting.R. (2007). The spatial evolution of the British automobile industry: Does location matter? Industrial and Corporate Change 16(2) , pp. 213–238. Catalan, J. (2010). Strategic policy revisited: The origins of mass production in the motor industry of Argentina, Korea and Spain, 1945–87. Business History 52(2) , pp.207–230. Fortunato, J. (2009). Using sponsorship as a form of public relations: A case study of Chevrolet and Major League Baseball. Journal of Sponsorship 2(4) , pp.330-339. World Bank. (n.d.). Worldbank. (n.d.). Retrieved from www.worldbank.com Read More