Macro Environmental Forces that impact Motor Vehicle Industry - Case Study Example

Macro Environmental Forces that impact Motor Vehicle Industry Name Course Name and Code Instructor’s Name Date Table of Contents Introduction 2 Safety 3 Greenhouse gas emission 5 Changes in consumers needs 6 Conclusion 8 References 9 Introduction The purpose of this paper is to discuss environmental factors that impact on motor vehicle industry in Australia. The paper mainly focuses on safety, carbon emission and changing consumer needs in Australian motor vehicle industry. Safety Safety issues related to automotive industry are impacted upon by political landscape of the country. Political factors that can impact on a business include current and future taxation policies; current and future political support; trade bodies, grants, initiatives and funding; and the effect of worsening relations or wars with certain countries (Hiraoka, 2001). The year 2011 level marked the beginning of the United Nations Decade of Action for Road Safety (WHO, 2011). In this initiative, the UN highlighted the enormous advantages that can be reaped from coordinated efforts to attain enhanced road safety outcomes. In order to conform to this initiative, Australian government has designed a new National Road Safety strategy for 2011-2020 (Department of Infrastructure and Transport, 2011). The Australian strategy has established a vision which states that no person ought to be killed or injured on Australian roads. The strategy also sets targets for reducing the number of road crash serious injuries and fatalities by 30% by 2020 (Department of Infrastructure and Transport, 2011). Since road safety is to some extend dependent on safe vehicles, manufacturers have in recent past been involved in innovative vehicle safety technology. Most manufacturers are using four or six airbags as standards contrary to previous years when they installed only a single or two airbags (Klier & Rubenstein, 2008). This shows the emphasis being placed on vehicle safety by manufacturers. In addition, almost all new cars have electronic stability control to enhance their safety. Other innovative safety systems being integrated into new motor vehicles include lane departure warning systems, intelligent lighting systems, active braking systems and driver fatigue monitoring devices which are all geared toward ensuring road safety. Legal factors also have great impact on the motor vehicle industry as it relates to safety issues and its economic prosperity (Rogers, 2009). Legal factors that impact on businesses include legislations guiding areas such as competition, employment and health and safety; future changes in legislation; changes in European laws; regulatory bodies and trading policies (Smit, 2007). A major legal issue in relation to safety in motor vehicle industry in Australia is the focus on novice drivers (Department of Infrastructure and Transport, 2011). There has been a rising concern in motor industry that P-plate vehicle restrictions in various Australian state jurisdiction if not well designed and implemented. This has led to anomalies where yo8ung drivers are being pushed away from some new vehicles which have high safety ratings and as such impacting negatively on the sale of motor vehicles in Australian market. Even though the industry has raised concern over the issue it is yet to be addressed amicably and probably the industry will have to wait a little longer for the issue to be addressed. This is bound to continue impacting negatively on motor vehicle industry especially for luxury segment which is known to be made most of young and aged affluent people. Greenhouse gas emission Green gas emission is an environmental issue. Environmental factors which impact on businesses include the level of pollution created by the utilization of the product or service; recycling considerations; current and future environmental legislative changes and attitudes from the media, consumers and government. Australian public policy debate has among other issues been concentrated on climate change (Rollings, 2007). This has important implications for all the automotive industry including motor vehicle industry. It has emerged that motor vehicle industry supports the action to reduce carbon emissions (Dyck & Neubert, 2008). However, it has been argued that such an action implementation ought not to compromise on the competitive position of Australian motor vehicle industry. In addition it has been said that the implementation should not be aimed at reducing emission in Australia and at the same time leads to leakage of carbon emission from Australia to other external markets. The motor vehicle industry has been acknowledged for its efforts aimed at increasing fuel economy and reducing carbon emissions. It is estimated that the industry has cut carbon emission by 16% in the last decade mainly driven by new innovations in the industry. The trend to develop fuel efficient petrol engines is being witnessed globally and many motor vehicle firms are investing massively in this sector. In addition there have been new technologies aimed at reducing carbon emissions such as utilization of clean diesel, and development of hybrid cars, electric vehicles and battery (Beyer, 2010). In Australia, the federal chamber of automotive industries (FCAI) commissioned analysis of the possible effects of a carbon price on vehicle and component production in Australia on the basis of the embodied carbon content of a typical car (FCAI., 2011). The results of this study indicated that the cost of industry could be in the order of between $30 million and $46 million annually even if emissions trade intensive trade exposed industries are compensated for (FCAI., 2011). FCAI recommended that Australian government should use a carbon pricing mechanism that minimizes the risk of Australia being bypassed in future automotive investment. If the recommendation are taken into consideration and the government comes up with mechanisms for offsetting the impact of carbon price then Australia is bound to be an attractive market for future motor vehicle industry investment (Cooney & Yacobucci, 2007). However, if the recommendations are not adopted and carbon price caps are implemented, then the growth of motor vehicle industry in Australia is likely to slow down drastically. The prime minister committed the Australian government in 2010 to develop carbon dioxide emission standards for new motor vehicle (Beyer, 2010). It has been suggested that the burden of attaining future carbon emission reduction need to be distributed equally among individual brands operating in Australia. It is also anticipated that the standard will provide an effective encouragement for uptake of emerging low emission technologies and alternative fuels in Australian market. Changes in consumers needs Consumer needs are impacted upon by economic, social and technological factors. Economic factors entail the general economic situation; consumer spending strength, current and future government spending levels; the ease by which people can obtain loans; the current and future level of inflation, unemployment and interest rates; specific taxation policies and trends and exchange rates. The Australian economic backdrop presents both opportunities and challenges (Cooney & Yacobucci, 2007). The recent appreciation of Australian dollar has resulted in increased affordability of motor vehicles. As a consequence industry players expected that more people will be able to own a motor (Beyer, 2010). However, the rising interest rates, volatility of fuel and energy prices and the effect of natural disasters in both international and Australian markets have impacted negatively on the purchasing power of Australian motor vehicle consumers. Due to these effects passenger and light commercial vehicle sales have been resilient in recent past. Social factors which affect business include demographic factors; lifestyle patterns and changes in attitudes towards issues such as corporate responsibility, education and the environment; social mobility; ethnic and religious differences and media views and perceptions (Macdonald, 2007). In recent past governments and environmentalists have been pushing for reduction in carbon emission (Tylecote & Visintin, 2008). Many people are embracing green ideas. Based on this initiatives most people are bound to adopt more fuel efficient or hybrid vehicles which have less pollution on the environment Technological factors that affect businesses include relevant current and future innovations in technology; the level of funding of research; the way in which consumers make purchases; intellectual property rights and copyright infringements and global communication technological advances (Cooney & Yacobucci, 2007). There have been various advances in motor industry mainly aimed at increasing motor vehicle fuel efficiency and reduction of carbon emissions. Young people are more attracted to new technologies thus vehicles with innovative technologies are likely to win over the young population in Australian market. Conclusion The growth of motor industry in Australia is likely to be impacted upon by safety, carbon emission and changing consumer needs. To ensure motor safety Australian government has designed a new National Road Safety strategy for 2011-2020. The Australian strategy has established a vision which states that no person ought to be killed or injured on Australian roads. The strategy also sets targets for reducing the number of road crash serious injuries and fatalities by 30% by 2020. The motor industry has embraced many safety technologies aimed at enhancing road safety such as increased airbags, electronic stability control, lane departure warning systems, intelligent lighting systems, active braking systems and driver fatigue monitoring devices. A major legal issue in relation to safety in motor vehicle industry in Australia is the focus on novice drivers. The development of new policies guiding carbon emission is also likely to impact on motor vehicle industry in Australia. A study carried out by FCAI indicated that the cost of industry could be in the order of between $30 million and $46 million annually even if emissions trade intensive trade exposed industries are compensated for. It recommended that Australian government should use a carbon pricing mechanism that minimizes the risk of Australia being bypassed in future automotive investment. There is also an initiative to develop carbon emission standards in Australia which was commissioned by the Prime Minister in 2010. The economical factors prevailing in Australia limits the acquisition of motor vehicle. The social changes such as more people becoming aware of the need to reduce carbon emission are likely to shift motor consumption to technologies that are environmentally conscious such as hybrid cars. New technological advances in motor industry are likely to drive consumption of motor vehicles especially among young population. References Beyer, S. (2010). International Corporate Finance - Impact of Financial Ratios on Long Term Credit Ratings: Using the Automotive Examples of BMW Group, Daimler Group and Ford Motor Company. London: GRIN Verlag. Cooney, S., & Yacobucci, B. (2007). U.S. automotive industry: policy overview and recent history. London: Nova Publishers Department of Infrastructure and Transport. 2011. National Road Safety Strategy 2011 – 2020. Retrieved from http://www.infrastructure.gov.au/roads/safety/national_road_safety_strategy/index.aspx Dyck, B., & Neubert, M. (2008). Management: Current Practices and New Directions. London: Cengage Learning FCAI. 2011. President's report 2011. Retrieved from http://www.fcai.com.au/about/president%27s-report-2011 Hiraoka, L. (2001). Global alliances in the motor vehicle industry. London: Quorum Books. Klier, T., & Rubenstein, J. (2008). Who really made your car? Restructuring and geographic change in the auto industry. London: W.E. Upjohn Institute Macdonald, D. (2007). 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