Management Assignment 2 - Research Paper Example

Threats of New Entrants: Dassan Limited is a motor vehicle company based in South Korea, in which it manufactures automobiles for the Korean market. The company is looking to set up in Australia in order to produce cars for the domestic market. Dassan Limited is a well established company and has a strong financial credibility. This report is aimed to focus on the Australian car industry and the cultural aspects of Australia which Dassan Limited needs to be informed about before entering the Australian market.

Economies of Scale:The automobile industry is a good example of an industry that shows economies of scale. A car manufacturing plant can produce roughly around 10% of the automobile demand of the whole industry. But with this level of output, a company also needs high level of sales promotion and dealership. In order to fully sale the produced output, the Dassan Limited will need to start the advertising campaign on a very large scale. This strategy will decrease the cost per unit of automobile.

Generally the buyers prefer to deal with large and reputable manufacturers and dealers. Such a big network of credible dealers requires a large amount of investment in the automobile industry. Dealers also want to deal with big names and companies have to make a considerable effort at the time of establishing a company.Brand Loyalty:There are currently three big players in the Australian Automobile industry. Ford Australia, GM Holding Ltd and Toyota Motors Corporation Australia are the only three large scale automobile manufacturers in Australia.

Ford Australia is one of the subsidiaries of the Ford Motor Company and established in Victoria in 1925. The company also operates Ford Performance Vehicles which is an in-house tuning division.In 1856, the GM holding was formed as a saddlery business but became a subsidiary of GM Motors later in 1931. Holden has offered many locally manufactured vehicles like Holden Commodore to the domestic market. Holden also operates an in-house tuning division known as Holden Special Vehicles. Toyota Motor Corporation Australia is a subsidiary of Japan based Toyota Motors Corporation.

Toyota Australia promotes and manages their products in Australian market specially motorsport.Capital Requirements:The automobile manufacturing company needs high capital and labor to start up. As the Dassan Ltd is trying to establish itself in another country, it needs foreign exchange. Although geographically Australia is located near Korea but it is inaccessible through land so Dassan Ltd either can not utilize its previous expertise and resources or has to endure high shipment cost. The major costs for manufacturing and selling include:Labor - In automobile industry, machines play a very important role in the manufacturing process but the labor costs are unavoidable.

Apart from other resources, Dassan Ltd can transfer some portion of its human resource at a comparatively low price.Materials - The Company cannot make everything from scratch. They have to purchase aluminum, steel, dashboards, tires, seats etc. either from local suppliers or their old company suppliers in which case the company has to bear high freight and shipment cost. Advertising - Automobile Industry needs high level of advertisement to reach economies of scale. For which they need to spend millions of dollars to access people.

In the big multinational companies, the cost of advertisement sometimes exceeds the cost of production. As Dassan Ltd is a new entry in the industry, they need more sales promotion and advertisement to make their image in the eyes of local people.Analysis:The Australian automobile industry has very high barriers to enter. Dassan Ltd will face more barriers as it is trying to establish in a new country with different legislative requirements and different market trends. The industry will need large investment in manufacturing plant and other equipments, access to new dealers and suppliers of auto parts, compliance with legislative requirements of safety and establishment of a whole network of dealerships.

However these barriers can be tackled with proper planning and high financing. Understanding consumer trends and tastes are very important in establishing a car manufacturing company. Like other industries, the automobile industry depends heavily on consumer based sales and not on corporate transactions. For this reason, the reason of understanding consumer preferences and choices are mandatory in defining competitive strategy.