The Automobile Industry - Essay Example

The Automobile Industry The automobile industry is by no doubt one of the biggest industries in the business world and has grown tremendously since the inception of the first vehicle. The automobile industry can be said to refer to all the vehicle manufacturing plants and car brands that are currently present in the market. Having identified it as so, there is no need to say that this sector of business one of the most successful industries in business as billions of people drive cars all around the world thus there is hardly a shortage of consumers when it comes to this product (Plunkett Research). The industry can be further divided into the types of automobiles/vehicles that are manufactured by the various companies that are presently dealing in this commodity. Vehicles can be categorized differently depending on their purpose and design from heavy duty to transportation purposes to leisure brands. The cars vary in size, cost and luxury, and there are cars available for every type of individual in the market from trucks to saloon cars. The automobile manufacturers supply a number of markets from private owners to companies who may require specific types of vehicles, for example, a construction company will require a number of heavy duty trucks to transport their material from one place to the other while a taxi service will require a large number of saloon cars to transport their clientele (J.D. Power). It is for this reason that the market structure of this industry can be referred to as an oligopolistic market despite the fact that they deal in basically what can be described as the same product (that is, vehicles). The automobile industry is made up of 15 major companies which supply vehicles to the wide consumer base in need of cars (Schmitt). The market structure has allowed for the firms present in this industry to have a chance at fair competition as a manufacturer can determine to target either one segment of the market or decide to dabble in all the different types of vehicles. The fact that there are so many vehicles to choose from means that the competition for the market in this industry is not as harsh as others and organizations involved have enough wiggle room to operate without exactly worrying about being bullied out of their share of the market unless faced with extraordinary circumstances. Some firms choose to focus on one particular category of vehicles so as to set up a stronghold in that area which makes it easier for them to handle any competition that they may face (J.D. Power). For example, CAT mainly focuses on heavy duty machinery that is used in industries like construction such as cranes and tractors and this has enabled it to establish a foothold in heavy duty machinery vehicles. The profit margin on the other hand is not as evenly shared out as the more popular car brands hold a majority of the market when it comes to private vehicles thus some companies can be said to hold a lion’s share of the profit when it comes to car sales. At the current moment, there are more firms exiting than entering the market due to the economic crisis that has hit various parts of the globe such as Europe leading to the reduction in car sales for a while which has meant that the less popular brands have been able to sell even fewer cars than usual (Eisenstein). The manufacturing of cars is not a business venture to be entered to light heartedly, and it costs a considerable amount of money to set up. Thus, if a company is not able to sell most of the cars that it produces they stand a chance of incurring losses at an alarmingly speedy pace that may through the company into an irrecoverable debt if the situation is not handled soon. A good example of this is the Chrysler Company that had to stop operations after failing to be able to move the required quota of cars that would have kept it afloat. The market for the product (that is, vehicles) can definitely said to be an international one as automobiles of all shapes and sizes can be found globally. Cars have become a required necessity of everyday life and individuals use them to get from one place to another at such a frequency that if vehicles were to cease to function all of a sudden the world would come to a stand still as they remain the primary source of transport for individuals all around the globe (Schmitt). So popular is the use of motor vehicles that the few places that lack this mode of transportation are famous all around the world for that fact. A good example of such a place is Lamu in the country Kenya where they have stuck to the use of traditional means of transportation such as bicycles and donkey drawn carts in a bid to preserve their culture. This spot has become a popular tourist location over the years as a result. Product innovation is an essential part of the automobile industry as companies strive to compete with one another for the current market through the introduction of new cars every few years to keep the market interested in their products as well as provide better quality to their loyal consumers while attracting new ones in the process (Plunkett Research). A good example of this type of innovation is the progression in terms of vehicle design from stick-shift gear boxes whereby drives had to change the gears manually to the automatic kind that as the name suggests, happens automatically. Response to competitive pressure from other firms in the business is responded through a number ways with the most popular being the coming up of new designs (J.D. Power). These designs come with new features that other automobiles will not have and thus attract potential buyers to their product. The most prominent features in today’s vehicles have to do with enhanced technology such as GPRS and Satellite Navigation systems, TV Screens and Improved user interfaces among others. Another way in which firms can attract new customers is the reduction of the prices of their older models. Works Cited Eisenstein, Paul A. Building BRIC's: 4 Markets Could Soon Dominate the Auto World, 2011. TheDetroitBureau.com. Web. December 10, 2012. Available at: http://www.detroitbureau.com J.D. Power and Associates. Global Automotive Outlook for 2011 Appears Positive as Mature Auto Markets Recover; Emerging Markets Continue to Expand, 2011. Web. December 10, 2012. Available at: http://businesscenter.jdpower.com/news Plunkett Research. Automobile Industry Introduction, 2008. Web. December 10, 2012. Available at: http://www.plunketresearch.com Schmitt, Bertel. Auto Industry Sets New World Record, 2011. The Truth about Cars. Read More