The Nature of the United States Automotive Industry - Essay Example

US Automotive Industry: A PEST Analysis ID# Contents: Introduction 2 Political Error: Reference source not found Government Manufacturing Protection GOVERNMENT CONTRACTS Economic Error: Reference source not found Recovering Sector STEADY INCREASE OF CONSUMER DEMAND Social 4 Social importance of the car AFFORDABILITY OF THE CAR Technological 5 Research and Development focus IMPORTANCE OF EPA GUIDELINES Legal 6 Adherence to standards Importance of recall laws Environmental 6 Low Risk of Natural Disaster Relevence of EPA regulations Conclusion 7 Bibliography 8 Introduction: The nature of the United States automotive industry is a topic and focus that has intrigued many; both industry analysts and those that might seek to make a profit by campaigning against domestic US auto manufacturers. As a means of seeking to understand this industry to a more effective and appropriate degree, the following analysis will provide a PESTEL analysis; inclusive of discussing factors that affect the US auto industry related to political, economic, social, technological, environmental, and legal factors. Through such a level of discussion and analysis it is the hope of this particular author that the reader will gain a more informed and valuable understanding in terms of the way in which this particular industry operates and what its determinant factors are. Political: In terms of the political influences and dynamics of the US automotive industry, it must be understood that a significant shift has occurred over the past several years. Beginning with the 2007/2008 economic downturn, the United States government made it clear and apparent that it was willing to step in and offer to be a lender of last resort for the struggling domestic auto manufacturers. This was, at least at that time, an unprecedented move that further cemented the relationship that the political system had to the industrial base of United States auto manufacturing (Townes, 2011). Another noted political involvement that the government has with the automotive industry is in terms of the way in which very large domestic orders are fulfilled by the three major US automotive manufacturers; Dodge, Ford, and General Motors (Hoke, 2011). As the United States government purchases only domestic made automobiles to fulfill its fleet inventory needs and to provide equipment for US personnel stationed overseas in embassies and other foreign environments, the interrelationship and involvement that the political and governmental process has to the automotive manufacturing sector is profound and connected at various points (Roberts, 2014). Economic: As indicated previously, the past six years have been an extraordinarily difficult period of time for domestic auto manufacturers. This is as a result of the fact that that their overall demand has dropped to record lows and the ability of consumers to afford and purchase new products has dropped commensurately. However, the past year has indicated a situation in which increasing demand has once again been exhibited and there is a steady but determinant increase in consumer interest for new products, new technologies, and available products to match existing needs. Whereas the brief period of growth that has been exhibited over the past year or two is not indicative of a general trend, it is likely that the dynamics that have been discussed thus far will continue to provide for somewhat of a resurgence and recovery within this particular industry. Social: One of the more unique dynamics that helps to define the American automotive industry has to do with the overall social importance that the car has. As compared to many other cultures and/or societies, are within the United States is inherently and intrinsically related to a sense of freedom, individuality, and adulthood (Lichtenstein, 2014). As such, it is often seen as a rite of passage and fulfills a very important societal role in determining which individuals are mobile and which are not. An additional social issue that impacts upon the US auto industry has to do with the affordability of the car. As compared to many other nations around the world, the average salary within the United States is sufficient to purchase a midpriced/mid ranged automobile (Richards, 2012). This dynamic creates a situation in which the broad majority of individuals within the United States are capable of affording a car and of exhibiting the social behavior that was discussed previously within the aforementioned point of social importance and the automobile in the American mind. Technological: In terms of technological factors that are impacting upon the United States automotive industry, the first of these is in terms of the advanced research and development that has taken place as a means of matching the research and development that is currently being exhibited within both Japan and Germany. As the United States domestic auto manufacturing market is ultimately in direct competition with these two regions, a primary level of research and development focus has been required as a means of ensuring that the United States automotive industry remains relevant within the current market space (Jeans, 2012). An additional technological factor that has come to be exhibited recently has to do with the overall higher emphasis on fuel economy and safety that is being promoted by the United States government. Whereas this can of course be discussed in terms of legal issues, is also something that is relevant to discuss in terms of technology; as a great deal of analysis and development is currently being directed towards providing safer vehicles that are capable of traveling further between fueling stops (Eisenstein, 2013). Legal: One of the clear illegal issues that faces the current United States auto manufacturing industry has to do with the strict adherence to government standards; inclusive of the Department of Transportation standards in terms of vehicle and passenger as well as pedestrian safety. As these standards grow and evolve each and every year, domestic US auto manufacturers have to continually evolve as a means of meeting these legal requirements and ensuring that their products are capable of meeting and exceeding such standards (Zhou, 2013). Another legal issue that is represented within the domestic auto industry of the United States has to do with the emphasis upon recall laws and the need to provide ongoing service, maintenance, and potential repair of malfunctioning parts and equipment. Whereas many other nations do not require this as a functional part of the auto manufacturer’s obligations the consumer post sale, the United States is a clear exception to this rule. Environmental: Firstly, it should be noted that the United States domestic automotive industry is one that is not likely to be impacted by natural disaster. As a result of the fact that the majority of US manufacturing capability is positioned in the Northeast, far away from the ocean and also far away from any natural fault lines, the potential for a particularly the disastrous natural occurrence to halt this industry and impact negatively upon its ability to fulfill orders is not likely (Guarino, 2011). Similarly, strict adherence to EPA regulations concerning emissions and other arm standards will encourage a further level of profitability and growth for the firm; as the available environment will not be as heavily impacted on as compared to the way in which the automotive industry previously manufactured cars and vehicles that were not conscious of environmental issues and greenhouse gas emissions. Conclusion: From the analysis that has been performed up until this point, it is the interpretation of this particular student that the United States domestic automotive industry is well-positioned to regain many of the customers that it lost as a result of the economic downturn of 2007/2008. Barring any drastic change in the environment, the legal environment, the governmental environment, or any further changes to the economic environment, it is the expectation of analyst that clear and immediate growth will be projected for at least the next decade. Bibliography Chaddock, GR 2008, Tough line on auto bailout may extend to other industries, Christian Science Monitor, 15 December, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Eisenstein, PA 2013, US auto industry welcomes tough car talks with Japan, Christian Science Monitor, 12 May, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Guarino, M 2010, Obama lauds Fords bid to boost auto exports, including 2011 Explorer, Christian Science Monitor, 5 August, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Hoke, F 2011, WHEN CLEANER FUELS MAKE DIRTIER AIR, Environment, 33, 1, p. 22, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Jeanes, W 2012, From the top, Car & Driver, 34, 10, p. 93, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Lichtenstein, N 2014, The United Auto Workers: Vanguard or Rearguard?, Dissent (00123846), 51, 4, pp. 97-101, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Richards, I 2012, CAN AUTO INDUSTRY MELTDOWN BE STOPPED?, USA Today Magazine, 135, 2738, p. 8, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Roberts, C 2014, Labour and Globalization in the North American Automotive Industry, Conference Papers -- International Studies Association, p. N.PAG, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Townes, G 2011, US auto industry in an economic freefall, New York Amsterdam News, 13 November, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Zhou, X 2013, The decline of the US auto industry , Newsweek, 108, 15, p. 74, Academic Search Complete, EBSCOhost, viewed 11 November 2014. Read More