Revolutionary Changes in the Automobile Industry - Coursework Example

HR in International Business Introduction: I select automobile industry to do the analysis. This is because it is an area of business that has seen revolutionary changes in the recent few years and I can cover most of the aspects of my module by discussing this. This paper will focus on the present position of automobile industry in the global economy, the emerging trends, with a focus on one of the leading player in this business. The study will also analyse the areas and locations where the industry is focusing at present and where it will extend in the future. Automobile industry is one of the fast growing industries in the world. In the olden days, automobiles were considered as a part of luxury but now it has become a basic necessity of human life. The impact of industrial revolution and other socio economic changes has created a huge opportunity for automobile industry as a whole. “The history of the automobile begins with the technological breakthroughs that occurred in Europe during the early 1800s and continues a century later with the pioneering efforts of American manufactures to begin mass-producing cars. The world economic downturn leading up to World War II led to consolidation in the fragmented automobile manufacturing market, while in the post war period, renewed economic growth, television advertising, and an expanding road system accelerated sales for automobile producers in many industrialized countries. Design, service, and speed became trademarks of the successful companies, as evidence by the every growing range of car models and the increasing popularity of NASCAR racing in the United States.”(Issue 2: Fall 2004: The Automotive Industry. Automotive History). Presently, automobile industry is rated as the largest and most technically developed industry. In the survey of Forbes magazine four companies from automobile industry are among the world top ten. It is the largest industry both in terms of capital deployment and technological improvements. It is estimated that more than 100,000 patents created that for the gradual changes of modern automobiles. We can point to the first theoretical idea behind the invention of automobiles that had been drawn up by both Leonardo Da Vinchi and Isaac Newton. First propelled road vehicle invented in 1769, by French engineer and mechanic Nicolas Joseph Cognot, it was a military tractor used with a steam engine power. In the early stage motor vehicles are used steam power to drive its engine. Gradually petrol and other fuels replaced for steam power still research and development wing of all automobile manufactures thinking for another non polluting energy sources. [The History of Automobile by Mary Bellis] Automotive Industry’s Position in the Global Economy: In the early stages automobile manufacturing industries were located in the countries of east Europe and North America. At that time this industry used labour intensive method for producing motor vehicles. After the Industrial Revolution this industry evolved itself to adapt to the more mechanized, capital intensive method of production. The companies began manufacturing and selling their vehicles in the global market. In the past, most of the countries followed a close economic system but now the situation changed and the world economy has become more open in the backdrop of globalizations. Countries have now signed agreement for free trade relations; this, coupled with the influence of WTO and other international organizations, creates a free global business, environment. The resultant situation while conducive to industries to expand and grow in a global market, also created a lot of competition. “Competition typically is defined as among firms within an industry producing products that are substitutes for one another. Therefore, the identification and evaluation of marketplace competitors is a key element of strategic marketing and a vital element of corporate survival.” [Broadening the competitive environment the customer perspective]. In automotive industry competition is very high as global manufactures are vying for a commanding position, by employing latest technology and business strategies GM, Ford Motors, Daimler Chrysler, Toyota, etc. are the leading global competitors in automotive industry. Ford Motor Company was founded by Henry Ford, a visionary American engineer in June 16, 1903.He understood the new opportunities in mechanical industry. When they sold their first model in Detroit at that time Ford Motors was just one of the 15 car manufactures in Michigan, But Ford accrued its own name by the initial few months and progressed at a steady pace. In the early years Henry Ford worked for Ford’s existence in automobile industry. His vision was to make cars that are more affordable to the consumers and make the product attractive. He acquired capital and became the president of Ford Motor Company. After the World War-I, Ford Motor Company has expanded their manufacturing activities into other vehicles also. In the year 1917 Ford Motor Company started to produce trucks and tractors. In the initial stages, Ford Motor Company started their manufacturing in US; but afterwards they expanded their manufacturing and marketing activities to other parts of the world. Today, Ford Motor Company is one of the largest automobile manufacturers in the world. The present competitive market environment is relating with fast production and distribution. A company’s success with global operations is to cover the distance between market and production area with in the minimum time. It is also a big challenge for manufactures to update their technology at par with that of their competitors. Identify the locations where resources are abundantly available as also the potential market, and integrating these two things to competitive advantage is the main factor of Ford Motor Company’s success in global automotive industry. “Ford Motor Company is a global leader in the automotive industry, selling more than seven million vehicles annually in more than 200 markets worldwide. The company employs more than 370,000 people, and has 112 wholly owned, equity-owned and joint venture manufacturing plants in 30 countries on six continents. Ford has nine automotive brands Ford, Lincoln, Mercury, Jaguar, Mazda, Volvo, Aston Martin, and Land Rover. In the U.S., Ford (including Visteon, its automotive components and systems subsidiary) employs over 173,000 employees and has manufacturing and assembly facilities in 47 cities in 14 states.” [Auto alliance driving innovations Ford Motor Company]. Ford Motor Company also is committed to protect environment and they give priority for protection of natural resources and also take appropriate measures for reducing pollution and environmental deterioration. The company is working in close rapport with government and key advocacy groups to achieve their goal of natural protection and sustainable growth. In addition to its automotive business, Ford is also working with other automotive service like vehicle rental and leasing company and repair chain in Europe and Asia. Ford also concentrates on E-commerce with technological collaboration with Yahoo, Oracle, Hewlet and Packard. Ford Motor Corporation is rigorously following their strategy on these areas also. Locations play a very important role in automotive business environment. In addition, technological improvement and development in communication and information technology helps organizations to achieve competency. Ford has their manufacturing plants in US and other countries of Europe and Asia, the main competitor of Ford motor company are General Motors but the reason of Ford growth is that they are producing more affordable cars “Ford is in better positioned than GM to be where the entire market is headed. Theres expandable low-end volume under the Ford nameplate, plus affordable models from Mazda, Mercury and now, perhaps, Daewoo. GMs units are concentrated in the low and midrange, with too many dealers and undistinguished products” (Gross, Ken. (July 2000). Ford: Big, Bigger, Biggest – Ford will be the World’s Leading Automaker – Brief Article). The automobile manufacturing industry is one of the largest industries within the US and this sector contributes the large amount for US GDP. The US is the worlds largest producer and consumer of motor vehicles with production reaching 12.2 million units in 2002. The Major Three U.S. Manufactures makeup approximately 76 % of U.S. passenger vehicle production, while Manufactures from Japan, Toyota, Honda, Nissan, Mitsubishi, Subaru, and Isuzu represents 18 %, and European automakers, BMW and Mercedes (division of Daimler-Chrysler) make up nearly 2 %. (Issue 2: Fall 2004: The Automotive Industry. Modern Automobile Manufacturing). The EU is one of the largest markets in automotive and the global automotive manufacturing with integrated operations consisting of: research, design, development, production and sales. The total EU manufacturing of automotive is higher than US and Japan but individual EU countries do not produce more than US and Japan. “The importance of the automotive industry on the economies of individual EU countries varies from country to country. According to recent reports, Germany, Sweden, France and Spain’s automobile production represents approximately 10 % of total manufacturing, while the average for the EU is about 8 % The EUs largest automotive producer is Germany estimated at 30 % of EUs total production, followed by France at 19 % and Spain at 17 %, and the United Kingdom at 10 %.These countries are the largest automotive markets in the region.” (Issue 2: Fall 2004: The Automotive Industry. Modern Automobile Manufacturing) The Asian Automotive market is base mainly in three countries: Japan, China, and South Korea these markets are continually growing. In late 1990s financial crises in Asia created a decrease in automobile production; but after the recovery in the year of 2000, automotive production increased and now this region has acquired a higher growth in production. Technological improvements and huge capital investment from US an EU countries have nourished the industry towards further growth. Ford motor company is one of the main US manufacturers in this region. They have collaboration in all operations including production and marketing with domestic manufactures in India, China and other south Asian countries. Economical development of India and China would create a good opportunity in the future for further expansion of their industry. Especially India can take advantage of its technological development in exporting their products to global market as the cost of their products is competitive. Auto makers are expecting a potential market for their product in this region. China will became a large market for automobiles in the future, recent years china overtook France and it became the fourth largest market in the world, Chinese auto market reported 37% growth in the last year, producers around the world setup production plants in china for exploiting growing demand for Automotives in Chinese market. Ford Motor Corporation settled a $100-million plant in Chongqing, has already announced its intention to increase its investment to $1 billion over the next few years. Most rival car makers have announced equally optimistic expansion plans. [Ron Gluckman, China Shifting in to High Gear]. Automobile Industry’s Activities and Why These Occur at these Locations: Major auto manufactures activities like production and marketing are located in the countries of North America, Europe and South Asia. Automotive industries play a major role in these countries’ economic activities and this sector provide many job opportunities. Availability of raw materials, human resources and technological, mechanical support in these countries is the main factors of automotive industries growth in these countries. The main reason of growth of auto industries in these areas of the global economy is factors that are specific to each national context, such as market size, consumer tastes, or geographic proximity to large markets, are important to understand the real cause of industrial development in a region. For example in North America, US automobile industries developed fast and expanded their market into other parts of the world. US automotive industry has more than 100 years of history, but at the same time another North American country, Canadas relatively small vehicle market is controlled by the US Auto makers who exploited Canadian Auto market. But at the same time it was a constraint to developing a stronger Canadian auto industry. This opportunity helped US Auto makers to dominate North American Auto industry, depending on those automakers, and the oligo-polistic competition in the industry. The Canadian government overcame these problems through a liberal approach to the industrys development by gradual integration with US auto makers. This situation helped US Automakers to start their production in Canada. “Ford kept a leadership position for decades in the Canadian auto industry; there were different moments when the company had a key role in that industrys development. At the same time, Canadas liberal approach to the auto industrys development was important in Fords overall competitive performance.”[Ford of Canada, Confluence of interest in liberal approach to automotive development] (Ford and the Global Strategies of Multinationals). Major automotive manufactures strategic planning for marketing and production is another reason for their growth in all parts of the world. “Today, the modern global automotive industry encompasses the principal manufacturers, General Motors, Ford, Toyota, Honda, Volkswagen, and Daimler Chryslers, all of which operate in a global competitive marketplace. It is suggested that the globalization of the automotive industry, has greatly accelerated during the last half of the 1990s due to the construction of important overseas facilities and establishment of mergers between giant multinational automakers.” (Issue 2: Fall 2004: The Automotive Industry. Modern Global Automobile Industry). Changes in global trade and open market system provide a good situation for global distribution of automotive products which in turn creates a high level of competition among the manufactures of automobile. Product competition is the main concern in automobile industry. People prefer new models and vehicles that new technological improved vehicles. The key competitive area of competition is in technology so the manufactures try to improve their technology. Manufactures from Japan particularly adopt the US production methods and technology and they modified models from US it create the competition of products. “The Japanese auto makers became “the measure of competitive excellence in the world.” Their system of production, known as lean or flexible production, changed the industrys competitive rules.” [Ford’s survival strategy]. This competitive production system helps Japanese Auto manufactures to rapidly expand their market all over the world. Unlike the Japanese and European automotive markets, early times the U.S. auto industry mainly sold their products in local market, and Canadian market. After the US- Canadian Automotive Products Agreement in 1965, US automakers began exporting their vehicles to Canada. At the same time, Japanese and European manufactures imported their product to US market. Competition from Japanese and European automotive manufactures forced US manufactures adopt counter strategies to protect their market. Therefore, US automotive manufactures changed their strategy to expand their market into other parts of the world. Ford Motor Company’s strategy on this area is very important. Ford continued to sell their product in US market and at the same time they expanded their market into other parts of the world. This is the main strategy of Ford Motor Companies to become the global leader but General Motors Strategy was only targeting US domestic market. In early 1980s because of the major competition from Japanese manufactures, three of US’s, major auto makers tried to change their strategy for competing with Japanese manufacturers in their domestic market also. US manufacturers exploited their competitive advantages by building foreign collaborations and trying to integrate their operations with them for reducing of cost production and building better markets. Ford Motors enjoyed an edge over others in winning the implementation of such a strategy, because of the major competitive advantages in foreign operations compared with GM and Chrysler. Ford thus achieved a good market in Asia and other European countries. The European Union is another main region of automobile manufacturing and marketing. US manufactures like Ford, GM and others have production plants in Europe. Each country has its own factors for developing automotive industry there. For example Israel is one of the growing automotive manufacturing countries in the Middle Eastern region. Israelis’ advanced technologies and availability of raw materials are the main factors of growth in automotive manufacturing. Israel is world’s largest producer of magnesium. Use of dye cast magnesium parts in the automotive industry has provided tremendous opportunities for Israeli Manufactures to enter automotive industry. Israel manufacturers made collaboration with world leading automotive manufactures like GM, Ford and others for producing these high tech components, and also many Israeli military companies have successfully applied advanced technology for the production of Automobiles. Better Economical position and technological improvements are the main factors of US and European countries command in automotive industry in the past. Factors are different in each country’s context for improving automotive industry in that particular area. Market size, economical condition, availability of human resources and geographical proximity to larger markets etc are some such factors. Global automotive industry’s activity like manufacturing relates directly to higher technological requirements which are the reason why during the earlier times automobiles located primarily in countries like US and European Countries. Availability of raw materials and skilled human resource is very important for the growth of automotive industries. Today situations have changed because of the impact of globalization and trade agreement between countries which has created a global integration of automotive manufacturing and distribution. Liberal economic policies of Asian and other countries create lot of opportunities in this sector. After Second World War Asian countries like Japan and South Korea achieved a good position in global automotive industry. Technological improvements of Japanese manufactures are helping to develop a global opportunity for Japanese automotive industry. Japan is the Leader in Asian automotive industry and Japanese automotive giants like Toyota, Honda etc have good market share in Asian and European market. They have manufacturing plants in other Asian countries like China and India. The main competition from Japanese manufacturers to European and US manufactures is on small segment vehicles. Ability to adapt to changes in technology and innovative production methods are the main factors of the success of Japanese auto industry. South Korea is another main automotive manufacturing country in this region. Presently there are seven manufacturers. South Korea has no independent automotive manufactures. Most of the Korean manufactures have collaboration with US and European manufactures. Hyundai is one of the leading auto manufacturers in this country. They have collaboration with Daimler Chrysler, and such alliances help Korean manufactures to build a global marketability for their automotive products. The main activities of automotive industries are production and distribution of vehicles. Ford Motor Corporation’s activities relating to their production and distribution are located all over the world. Increasing global trade makes opportunity for growth in world commercial vehicle distribution, which has again expanded global competition amongst the automobile manufacturers. Most of the automotive manufactures are paying attention to manufacturing and distribution of commercial vehicles In this particular situation all automotive manufactures want to retain their market and create new market areas Impact of globalization creates a global marketability for the automobiles in all over the world. New technological improvement and modern marketing system are the key areas of future automobile industry. Ford Motor Corporation takes initiative for the scientific and technological improvements of automotive industry. Pollution is one of the main problems in the modern world that automotive manufactures have a key role to reduce air pollution. With this objective in mind, many automotive manufactures are working in collaboration with world organizations. Automotive industry is currently striving to overcome the problems of pollution and environmental deterioration. Apart from this Ford Motor Corporation and other major auto manufactures are planning and studying for producing pollution free vehicles like electric and other energy automobiles, to combat the problem. Work Cited Issue 2: Fall 2004: The Automotive Industry. Automotive History. http://www.loc.gov/rr/business/BERA/issue2/history.html (accessed February 25, 2007). Bellis, Mary. The History of the Automobile. Early Steam Powered Cars. http://Inventors.about.com/library/weekly/aacarssteama.htm (accessed February 25, 2007). Heiser, Robert S., Shaun McQuitty, and Andreas W. Stratemeyer. (2005). Broadening the Competitive Environment: The Customer’s Perspective. http://oxygen.vancouver.wsu.edu/amsrev/theory/heiser12-2005.html (accessed February 25, 2007). Gross, Ken. (July 2000). Ford: Big, Bigger, Biggest – Ford will be the World’s Leading Automaker – Brief Article. http://findarticles.com/p/articles/mi_m3012/is_7_180/ai_63974716 (accessed February 25, 2007). Issue 2: Fall 2004: The Automotive Industry. Modern Automobile Manufacturing. http://www.loc.gov/rr/business/BERA/issue2/manufacturing.html (accessed February 25, 2007). Issue 2: Fall 2004: The Automotive Industry. Modern Global Automobile Industry. http://www.loc.gov/rr/business/BERA/issue2/industry.html (accessed February 25, 2007). Ford and the Global Strategies of Multinationals. http://www.questia.com/PM.qst?a=o&d=108134154 (accessed February 25, 2007). Gluckman, Ron. Shifting into High Gear. http://www.gluckman.com/ChinaCars.html (accessed February 25, 2007). Ford and the Global Strategies of Multinationals. http://www.questia.com/PM.qst?a=o&d=108134154 (accessed February 25, 2007). Auto alliance driving innovations Ford Motor Company. http://www.autoalliance.org/about/members.php (accessed February 25, 2007). Read More