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The Economics: American Vs. Foreign - Essay Example

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While some American car companies may be sitting there scratching their heads, the answers aren’t quite that complicated. For the first time ever, Americans are now buying more foreign made cars. Many will sit and ask why is this? The first reason is quality. …
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The Economics: American Vs. Foreign Behind the ever changing structure of today society sits the never sleeping principles of supplyand demand, the quality of the product, and the ability of a person to afford what they want. These simple economic principles can easily explain the shift American is making towards foreign cars and foreign imports. While some American car companies may be sitting there scratching their heads, the answers aren't quite that complicated.
For the first time ever, Americans are now buying more foreign made cars. Many will sit and ask why is this The first reason is quality. Most American car owners will talk to you about the decline in the quality of American made cars against their imported brethren. 52.9 percent of cars sold in the first half on 2006 were import cars (Josee 2006). Quality, as well as safety and advancing technology all play a part in this. Also, foreign made cars hold their value longer, making any import car now only a safer, more technology savvy investment for today, but a better purchase for the long road ahead. Foreign car makers as well are planning for the future says James Bryant, automotive industry editor for Hoover's Inc, "Toyota has a 10- to 15-year outlook on where the industry is heading, GM and Ford tend to play along with whatever happens to be the flavor of the week." (Josee 2006) Rising gas prices can also share some of the blame, as people are starting to back away from the bigger SUV, into smaller crossover SUV segments, which foreign companies are capitalizing on.
As the demand for foreign imports rises, then the demand for domestic cars decreases. This leads to an oversupply in the market of home grown cars, with the companies having to many cars than they know what to do with. With domestic companies have to now play catch up to the foreign companies, profits are not as high as they once were. This can lead to factories closing, as the domestic plants can not compete with the technology and demand for the import. General Motors may hold an 48 percent favorability poll with Americans, but import cars hold the same favorability against domestic built machines (General 2006). Also affecting the crisis is that foreign companies are putting tons of money into the American market, where we do not see as many Japanese people buying American made cars.
Really however, the bottom line comes down to quality against quality. Pricing factor ignored, people are going to pay for what they think they are getting for. And if any company A is offering a more affordable, better built product than company B, consumers are going to go to company A every day of the week. Also, reputation is affecting companies like Ford and GM, where even as they strive to improve quality, people may remember having problems with them in the past, and not buy from them again. Image is another half of the battle for sales.
In conclusion, many different economic factors are effecting the import versus domestic battle. Supply, demand, quality, and even history are all effect the companies battling for our pennies. But to put it simple enough, American car companies need to put forth a better built product to attract the buyers back, and then keep reliability and image high to keep people buying domestic.
References
Josee Valcourt
Foreign cars pass Big 3 October 8, 2006
http://www.detnews.com/apps/pbcs.dll/articleAID=/20060725/AUTO01/607250362/1148/rss25
No Author
General Motors Still a Giant October 8, 2006
http://www.rasmussenreports.com/2006/July%20Dailies/GeneralMotors.htm Read More
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