Industry Regression Analysis - Statistics Project Example

Industry Regression Analysis Introduction The understanding of how a market runs depends on a number of factors. Marketsare diverse and oriented in in different ways. Everyone going into the market has to understand the basic operations in the market before taking any serious investment steps. Under normal circumstances, market research informs the basis over which an understanding of the market is drawn. Regression is the single most critical tools used for market research and forecasting. The essence of regression analysis is to establish how market variables are related to one another. In any given market, there are the independent and dependent variables. Market researchers use regression analysis to determine the effects of one variable against the other. Ultimately, the effect of independent variables on the dependent variable forms an important basis over which predictions are done. For instance, market researchers may be keen to find out the effects of demand on the prices of commodities. The analysis can be stretched to examine how demand and supply affects the prices and by extension of the sales. Regression analysis provides an analysis over which a number of issues can be drawn for the sake of making predictions for the future (Bingham & Fry, 2010). An independent variable does not require any prompting as its constant features that make them stand-alone. Dependent variables experience a change when there are some elements induced into the system that affect the variable. The motivation on forecasting comes from the fact that the variables give an indication of the correct picture of what is investigated. The beauty of the independent variables is that the independent variable can be controlled at different intervals to determine how much it affects the dependent variable. Regression analysis is therefore a critical component in determining the relationship between independent and dependent variables not to mention the aspect of forecasting. The automotive industry is the single most vibrant industry in the world today. To be precise, the automotive industry in German has for a very long time remained competitive in the market. Over the years, there has been a surge in the labor force that has sometimes affected the companies in the automotive industry in terms of competition. The report provides a basis over which the industry can be understood based on a number of variables. Description of the industry The automotive industry in Germany has gone through a number of transformations since the time of inception. In the recent past, the automotive company in has experienced a growth, turnover that has never been witnessed in the history of any industry. The German industry deals with a wide range of automotive products. In the recent research, excerpts released to the public, the German market was found to be the most vibrant in terms of foreign direct investment. Consequently, the automotive market in Germany has a competitive advantage over a number of countries (German Trade and Investment, 2011). This industry has gone through immense transformation to the extent that penetrating the market has been a problem for those coming as new entrants. The competitiveness of a market is best understood by the profit turnover of every given company. Vehicles from Germany have gained general acceptance in the market. Pundits have argued that so far Germany provides that market with magic when it comes to the vehicles being sold to the general public (Osswald, 2007). On the flip side, the immense contribution of supplies in the German automotive market cannot be underestimated. In a recent report, it was established that there were about 70% of supplies taking part actively in the industry. The main agenda of the supplies is providing value added incentives to the products to the extent that the industry has been left as the only industry that is vibrant in its operation. The industry has low, medium and high companies. The competitive advantage of the automotive industry can be attributed to a number of factors. A number of stakeholders play a huge role in the transformation of the industry. Every company has a particular target market through which the vehicles are taken. One interesting thing to note is that most of the cars coming from the German companies are compliant in a number of ways. The effects of climate change have enabled the industry to produce vehicles that are less destructive to the environment. This means that the vehicles are built based on low carbon emission prospects. Consequently, the industry produces cars that relatively cheaper with various considerations being taken into consideration such as low fuel capacity. The industry targets people from all walks of life as long as one is able to afford. As they say in the industry, there is everything for everyone. The emphasis is the group mostly targets and that is the middle class and those who have attained high-income status. One critical factor to note is that technological innovations have been key to the spiral competitive advantage of the automotive industry in Germany (German Trade and investment, 2011). The automotive industry world over has seen some significant changes. For instance, countries such as the United States and Japan are some of the automotive markets that continue to do well in the market. It is important to note that a number of industries are emerging to the extent that a number of changes are beginning to be felt across the board. Globalization has brought a number of changes into the automotive industry not only in Germany, but the world over. Labor remains a critical factor to consider in the advent of globalization. Case in point is that the emerging markets that are have less capacity employ a workforce at a relatively cheaper rate. This is different from markets such the one in Germany where labor is of high value. In this sense, the underlying factor becomes wages. While emerging automotive companies would pay less for labor, established industries such as the German one uses numerous cash to bill the labor. Pundits have argued that this compromises on the competitive advantage of the companies. In this case, one may not be able to give a correct determination on what is expected of every industry in so far as profitability is concerned. When discussing competition, it is expected that every entity is at the same level to determine correctly the nature of competition. There are variations that continue to be experienced all across the world with respect to the automotive industry. Globalization has brought all the changes into the automotive industry. It is, therefore, relatively easier to make a comparative analysis in the automotive industry in so far as competition is concerned. Research question The research question in this aspect relates to how labor wages affect the competitive advantage of other companies in the automotive industry. It should be noted that labor is an independent variable in this case. Other factors play a part in altering the state of the wage bill. For instance, in emerging automotive markets, the cost of labor is expected to be relatively low (Hill & Jones, 2007). This is because there may be no serious challenge within the industry. In a country such as Germany, where companies are so established, every company seeks to have a workforce that is talented and above board. This ensures that every company gets the best in the market to produce products that are above and beyond other industry players. Labor becomes more of an issue to the already established companies than the places where industries are just trying to come up and get established. When the wage bill is high for a company, the resulting factor is that it weighs down on the profitability of the company. This in a wider sense affects the company’s prospects to compete either locally or in the global platform. It, therefore, proves a challenge to analyze the companies correctly based on how much value they got. Under normal circumstances, companies are bound to compete. Though the market segments may be a little bit different, globalization has made it possible to rank the countries based how they have influenced the global economy. Labor can reduce the competitive advantage of a company to a large extent and this then calls for a proper analysis to determine how the phenomenon causes some issues in the industry. Importance of the research question The research question provides a platform over which an understanding can be drawn with respect to how the automotive industry works. When there is a research question, it gives researchers to carry out investigations that can form the basis of adjustments in the market. For instance, in Germany, the cost of labor is very high. This is with respect to the functioning of the industry. The automotive industry in Germany, being a competitive outfit throughout the globe finds challenges in so far as dealing with the raising its stakes in the global market are concerned. Understanding how labor affects the overall competitive ability of companies in the industry can help make adjustments. Linear regression model Analysis The linear regression model is one that determines the relationship that exists between two variables. Under normal circumstances, there are variables that are independent and those that are dependent variables. Independent variables do not need any variances to establish a change. The independent variables determine their own being (Bingham & Fry, 2010). On the other hand, dependent variables are differentiated based on the influence of the independent variable. In a linear regression model, there are two values that are considered to be of critical importance. The variable ‘x’ and ‘y’ have a critical role in so far as determination of values is concerned in linear regression. The variable ‘y’ is conventionally referred to as the dependent variable while ‘x’ is the independent variable. ‘y’ cannot influence its own change. What happens in variable ‘x’ affects the dependent variable (Bingham & Fry, 2010). The change in ‘x’ can have minimal or maximum effect on ‘y’. For example, in the statistical analysis of the automotive industry, the linear regression can be used to come up with some critical determination. The research question has all to do with the effect of labor on the competitive nature of the industry. In this case, labor would ordinarily become the independent variable while competitive advantage would become the dependent variable. A change in the cost of labor would ordinarily affect the manner in which companies are able to compete. When the cost of labor is high, the company’s profitability goes down significantly. This then means that companies within the industry cannot compete at the same level. Consequently, when the cost of labor is down, the wage bill drops by a greater percentage. Then, this means that profitability for the companies in the industry is able to rise significantly. In essence, a change in the cost of labor brings about a number of effects on the competitive advantage of the companies to a larger extent. The automotive industry in Germany spends more on labor than any other aspect. This has weighed down significantly on the companies to compete with other global industrial zones. Pundits have always argued that the cost of labor has to go down for the German automotive companies to enhance their competitive advantage (Becker, 2006). Even though the industry remains vibrant, cost of labor remains a challenge to the extent that others have always sought to cut down on the workforce. This has never made much sense to the general wellbeing of the industry players. Rationale for the choice of variables The variables chosen in this case are cost of labor and competitive advantage. The rationale for choosing the two variables was to establish how much more there existed imbalances in so far as the automotive industry is concerned. The German automotive industry is the most vibrant going by the statistics. In essence, Germany stands in a better position to compete with other groups in the market as appropriate. The global nature of the automotive industry is diverse. The same things that happen in India do not happen in the German market. The target market for the two groups may be totally different. For instance, in India, the market population may not be oblivious about certain factors such as quality and cost. In Germany, the consumers are more specific about the quality and effectiveness. The type of labor force employed by the automotive in Germany may not be similar to that in Indian automotive industry. The rationale for choosing these models was based on the fact that they are directly influential in the industry. Three distinct companies are found in Germany. The Japanese companies, the American automotive companies and lastly, the German automotive companies. The three are the most dominant in the industry. The three companies compete on a planetary scale to the extent that what happens to the other has a direct influence on another company. Germany automotive industry has a workforce that is more vibrant and valuable. This means that companies spend more in trying to keep up with the expectations of the human resource. This weighs down on the companies in terms of the wage bill. When companies have to spend most of their cash on the wage bill, the competitive advantage goes down. This affects the companies to a large extent with respect to profitability. When the profits are down, the companies are not able to compete in a manner that is characteristic of a market. Data The data for statistical analysis was obtained from the various automotive institutions based on their labor force and financial records. Consequently, the data was received from the respective company websites and yearbooks not to mention the respective company magazines. In seeking company records based on finances and the nature of operations in the market, it was necessary to obtain data that are less controversial and with no biases. Results The results proved that cost of labor was so much affecting the wellbeing of the competitive nature of the companies in the automotive industry. In essence, the data analysis produced a rather shocking revelation that the cost of labor was by far the highest when it comes to expenses for the companies. The labor cost for the companies in the automotive industry in Germany were about 30% of the overall expenses for the company. This is almost half what the company gets in profits. It should be noted that apart from expensive labor companies have to contend with high production cost that weigh down on the companies. A number of the companies had a problem with the expenses in the human resource. This in a wider sense provided a number of challenges for the companies. Statistical hypothesis test In validating the results, the hypothesis testing was employed. The data collected from the different points were basically scientific in nature. This helped in forming a hypothesis around the given set of figures. Probability standards and the significant levels informed the basis for drawing up the conclusions about the cost of labor and the competitive advantage of companies in the automotive industry (Kanji, 2006). In hypothesis testing, the truth is never an obvious reality. In fact, there are two set standards. There are the alternatives and the null hypothesis. The two are done based on the fact that truth is not guaranteed (Kanji, 2006). Discussion Model assessment The model provided a broad perspective over which a number of issues could be painted. The linear model is better because it helps in drawing out the relationships between the various variables that are chosen. A number of controls could be ensured to see how much the various variables could change. For instance, the cost of labor could be altered to see how much it impacted on the competitive advantage of the companies in the automotive industry. To a large extent, the model was useful and very effective. The regression model is a conventional model that has been used by a number of people in the industry to forecast and make some determinations. However, there can be improvements made to the model to make it more effective. In improving on the model, it would be necessary to widen the scope so that it is able to accommodate more variables for analysis. In this sense, it means that having a number of independent variables and sees how much each affect one another. When there are a number of variables for analysis, it provides a broad perspective over which conclusions can be drawn. Cost of Labor and competitive advantage index Labor Last Previous Highest Lowest Projections Competitive advantage (%) Populace 82.84 83.75 82.54 72.67 81.97 20 People in employment 42103.00 41958.00 42003.00 37537.00 42031.49 32 Vacancies 457.10 449.30 891.70 57.80 445.47 56 Cost of Labor 106.67 209.28 109.67 82.87 109.65 10 Employment on long term basis 2.70 2.50 6.30 2.30 2.36 34 Productivity 133.70 103.20 114.20 17.00 102.04 25 Retirement for men 165.17 65.09 65.17 65.00 65.18 13 Retirement for women 75.17 65.09 65.17 65.00 65.18 15 Persons not employed 4054.70 3137.90 5288.20 85.00 2944.05 45 Wage bill 213.00 113.00 169.50 12.10 114.89 60 Wages in the manufacturing sector 511.60 113.30 181.00 7.70 112.07 70 Employment of the youth 3.70 7.70 16.50 5.70 7.58 5 Unemployment rate 4.10 5.00 14.20 0.40 4.90 3 Linear regression diagram on cost of labor and competitive advantage Appendix A. Introduction I. Description of the industry Automotive industry in Germany II. Research question III. Importance of the research question B. Linear regression model I. Rationale for the choice of variables II. Data C. Results I. Statistical Hypothesis J. Discussion I. Model assessment II. Improvement on the model References: Bingham, N. H., & Fry, J. M. (2010). Regression: Linear models in statistics. London: Springer. Becker, H. (2006). High noon in the automotive industry: With 29 tables. Berlin: Springer. German Trade and investment. (2011). The Automotive Industry in Germany. Retrieved From: < http://www.gtai.de/GTAI/Content/JP/Invest/_SharedDocs/Downloads/GTAI/Indu stry- overviews/io-automotive.pdf> Heneric, O., Licht, G., & Sofka, W. (2005). Europes automotive industry on the move: Competitiveness in a changing world. Heidelberg: Physical-Verlag. Hill, C. W. L., & Jones, G. R. (2007). Strategic management: An integrated approach. Boston, Mass: Houghton Mifflin. Kanji, G. K. (2006). 100 statistical tests. London: SAGE Publications. Osswald, S. (2007). Description of the German automotive industry - Critical analysis of the types of businesses existing in the industry and the government policies impacting on the industry. München: GRIN Verlag GmbH. Read More