Vauxhalls Strengths, Weaknesses Opportunities, Threats Analysis - Case Study Example

Vauxhall’s SWOT Analysis Vauxhall’s SWOT Analysis Introduction In this research paper, the author is going to discuss political, economic, social and technological aspects in European Union (EU) with the help of PEST analysis. The findings of PEST analysis will be used to develop a SWOT analysis for Vauxhall Motors as a car manufacturing business in the region. PEST Analysis Political Scenario EU is considered as a politically stable region in the world. The Governments in the member countries have formed an alliance that promotes economic stability and trade exchange between the member countries. In addition to that, the head of the states of member countries of EU have mutual agreement on developing economic policies that provide enormous growth opportunities to the businesses. The foremost impact of political policies and regulations is seen on the socially responsible conduct of businesses in the region. Due to the increasing pressure of environmental activists and consumer groups, car manufacturing businesses in the region are forced by the political administration to manufacturer automobiles that are safer with minimum harm the ecological environment (European Monitoring Centre on Change, 2004). Additionally, the Political administration of the region also works together towards providing relief to automobile manufacturing businesses in the form of levies on taxes, easing recruitment regulations and providing incentives for incorporating social responsibility framework in business practices. Economic Outlook The economic outlook of EU region is somehow unstable. There are countries in the continental alliance that are experiencing an economic downturn and are forced to provide bail-out plans to businesses in their respective countries. Spain and UK are the biggest example of financially unstable countries in the region. As a result, the purchasing power and spending trends of consumers in financially unstable countries of the region is reflecting a unfavorable trend. On the contrary, the car manufacturers in EU region are considered as a vital economic stimulator. This is because, in the manufacturing of automobiles, the manufacturers utilize other complimenting products such as textile output, aluminum, copper, steel, computer chips, iron, lead, plastic, vinyl and rubber. Considering this assertion, it can be said the car manufacturing is an important driver of the region’s economy (European Commission, 2009). Social Outlook The society in EU region perceives their vehicles to be reflecting their social status. Majority of the societies in EU region prefer vehicles that are environment friendly and designed keeping in view the modern trends. As a large part of the population in EU region belongs to middle or upper class, they prefer cars that are comfortable and luxurious. Moreover, the consumers in EU region do not drive a vehicle for more than 3 to 4 years which is indicative of the fact that the demand for vehicles is ever increasing in the region. Additionally, personal satisfaction of the consumers is another indicator of the purchasing trends amongst automobile industry’s customer base in EU region (Jurgens, 2002). Moreover, the demographic and psychographic attributes of automobile consumers in EU region reflects designs consumer behavior, where the prospects are very demanding and cannot be influenced easily. In this scenario, value addition is considered to be the key to success for the automobile sector in EU region. For this reason, the society in EU region prefers automobiles that are affordable, luxurious, environment friendly and reliable. Technological Outlook EU region provides one of the most advanced technological grounds and sophisticated machinery in the world for manufacturing vehicles and complimenting products. Moreover, research and development has been the key to success in the automobile sector of EU region. For this purpose, the governments of the region provide a significant amount of their revenues to research and development carried out in the automobile sector of the region. As a result, the vehicles manufactured in EU region are considered to be designed and marketed keeping in view the preferences of the consumers. In addition to this, the presence of social networks and other internet technologies has enabled the car manufacturing businesses to reduce their operating costs by engaging target audience of their marketing activities into a cheap and easy two-way communication. These assertions are based on the fact that more than 50% of automobile consumers in EU region made their purchase via the internet or made their purchasing decisions based on the information provided by car manufacturers over internet (Nelissen, 2002). SWOT analysis The SWOT analysis for Vauxhall Motors will be developed keeping in view the facts and figures presented in the previous section of the paper. This information will be compared against the business level strategies and resources of Vauxhall Motors in order to determine what are the key strengths, weaknesses, opportunities and threats to the company’s business in EU region. Strengths Vauxhall is the subsidiary of world’s largest car manufacturers, General Motors. The GM Corporation have good relationships with EU and possess a large customer base in the region. Due to this reason, Vauxhall enjoys a good reputation in the EU’s automobile sector. Moreover, Vauxhall has manufacturing facilities installed in the region, which provides the company an enormous support financially in the form of taxation levies and financial incentives. Vauxhall has achieved economies of scale in EU due to the superior quality vehicles it delivers to the customer base in EU. As a result, its operating costs are lower as compare to other competitors in the region. In this sense, it is eminent that if one Vauxhall model is failed in the region, the business will cover the losses from the profits generated from the sales of other models. Sales of Van and luxury sedans have increased in EU in the last five years. Vauxhall’s van and sedans are considered as being offering its customers luxury and reliability at the same time. As it is proven that the consumer behavior of American consumers is similar to the consumer behavior of consumers in EU region, it is eminent that Vauxhall will be succeeded in selling its vans and sedans on a large scale. Vauxhall possess state of the art research and development facilities in EU, which provides it an edge over its competitors. This is the reason that each of Vauxhall’s vehicles is designed keeping in view the requirements and preferences of consumers in the EU region. By doing so, Vauxhall ensures that the industry standards are met before presenting their offerings to the target market in EU region. Moreover, the demands of the political system in EU to base product manufacturing and offering strategies on the basis of market research are also fulfilled in this manner. Vauxhall design and deliver automobiles, which are designed keeping in view the consumers’ demand for speed and comfort. Therefore; the manufacturing strategy of the company urges it to acquire raw material at cheaper rates to deliver consumers an automobile that is cheap yet luxurious and reflects their persona. Weaknesses Vauxhall has reported a decrease in consumers’ demand for its vehicles in last two to three years. This is mainly because of reducing purchasing power of consumers as a result of the economic downturn. As a result, Vauxhall had to cut down its production of automobiles and even had to close down manufacturing of few of its model offered in EU region. In this scenario, the financial strength of Vauxhall is perceived to be deteriorating, and it is expected that the economic downturn of few of the major EU economies like Spain and UK will result in a further slump in demand of Vauxhall automobiles. Vauxhall’s workforce in EU is of the view that they are not being offered nominal salaries and compensation. As a result, Vauxhall’s turnover rate is high, and the company has to make huge expenditures on recruitment, training and development of new employees. Moreover, the high turnover rate also results in inconsistency in the quality of vehicles delivered and production capacity of the business in EU region. Opportunities Due to the economic downturn, the purchasing power of automobile consumers in EU region is reducing. On the other hand, the prices of petrol and diesel are also on the hike, which further reduces the motivational level of automobile vehicles in EU region to make the purchasing decision. Another complimenting factor is the demands of EU region’s governments and environmental activists from automobile manufacturers to deliver vehicles that are environment friendly. Vauxhall Motors in this scenario is on the safer side because the company is considered as an expert producer of vehicles that are run on dual fuel systems. Moreover, the fuel systems installed in Vauxhall’s car ensures the minimum amount of CO2 is emitted to the ecological environment which fulfills the demands of governments and environmental activists in EU region. The hybrid cars produced by Vauxhall are considered as cost efficient and reliable transportation means by consumers in the EU region. By allowing its employees to come up with ideas of cost efficient car manufacturing and eco-friendly fuel system development, Vauxhall can save precious amount of revenues from being wasted in research and development. At the same time, the incentives provided by the company against employees’ idea will help the business to overcome hiking turnover rate. Threats Due to the relief provided by the governments in EU region to the car manufacturers, there are a number of new entrants who are establishing their production facilities in the region. Additionally, the increasing demand for the automobile is another factor that automobile manufacturers are keen to serve the consumer base in EU region. Moreover, the aggressive market tactics adopted by the competitors in EU region also adds to the intense competition that Vauxhall is facing in the region. The direct competitors of Vauxhall in EU region are Volkswagen and Opel (another subsidiary of General Motors). These direct competitors along with other automobile manufacturers pay heavy incentives to the buyers upon purchasing their products. Considering the nature of business strategy adopted by Vauxhall in EU region, it is eminent that the company will have to alter its generic strategies as the new legislation are being deployed by the governments in EU region. Moreover, the increasing demands of environmental activists and consumers in the EU region may also prove to be vital factors in increasing the production cost and research and development investments of Vauxhall Motors. The import of refurbished automobiles from Japan, China and India into EU region is also a vital factor that might cause a reduction in Vauxhall’s automobiles. The increasing prices of fuel in the EU region might result in consumers switching to available alternate travelling means such as trains, bicycles and motorbikes. References European Commission. (2009). Automotive Industry: Comprehensive analysis of the evolution of the automotive sector in Europe. Geneva: European Commission. European Monitoring Centre on Change. (2004). Trends and drivers of change in the European automotive industry: Mapping Report. London: European Foundation for the Improvement of Living and Working Conditions. Jurgens, U. (2002). Characterstics of the European automotive system: Is there a distinctive European approach? Paris: Gerpisa International Colloquium. Nelissen, G. (2002). Structural change in the European automotive sector. London: European Metalworkers Federation. Read More