The Automobile Industry in the United States of America - Report Example

THE AUTOMOBILE INDUSTRY IN THE UNITED STATES OF AMERICA (Student Name) (Course No.) (Lecturer) (University) (Date) Automobile Industry Overview The automobile industry in the United States of America can be traced back to a late nineteenth century, and because of its domestic market size, it grew to become one of the largest automobile industries in the whole world. Later the industry was overtaken by Japan and China respectively (Klepper, 2012). It manufactures between eight to ten million automobiles every year. The United States automobile has been dominated by three major companies, they include, General Motors, Ford, and Chrysler. In the United States of America, Automobile Industry has been one of the fastest growing industries worldwide over the past years. According to the analyst, the sales of cars have been running at a very high rate especially in North America. In 2016, research that was done showed that U.S car plus their trucks recorded a total of seventeen million units (Klepper, 2012). The United States’ automobile industry was shaken during the Great Recession that took place between 2008 and 2010 and a lot of people thought that the automobile industry in the U.S was coming to an end. But the strategy of automobile manufacturers worked, and they are still on top despite the economic shake that America experienced. Outline of the Automobile Industry Market Segment Currently, the automobile sector has been experiencing a lot of growth as new players are joining the market industry. There are different ways of segmenting the automobile market. When doing market segmentation, it should be done according to the needs of the consumers’ groups plus the reason why they need the cars and not to focus on the classes of cars. There are four main ways of doing market segmentation they include geographic segmentation, demographic segmentation, psychological segmentation, and behavioral segmentation (Goldberg, 2005). Geographical segmentation This has been one of the most significant segmentation that is considered by the automobile industries specifically in big countries like China, India, and the United States of America. They considered this segmentation important because of the conditions of these regions. For instance, taking the segmentation of places like India, manufacturers will focus on the manufacturing of tractors since these areas concentrate majorly on agriculture. People from these areas will use their resources to purchase tractors that they will use in farms. Similarly, the companies that deal with commercial vehicles would segment their market depending on the number of industries in a given region. Those companies that deal with the making of luxury cars would set their target in urban areas. Demographic segmentation This is also another important foundation of segmentation on the automobile industry. This provides a segment depending on the financial status of the buyer or the target market (Goldberg, 2005). Other things that manufacturers concentrate on as they manufacture their cars are the age, status and many other social traits of the possible buyers. The companies that manufacture small cars will majorly target those people who are of the middle class. The companies that manufacture luxury cars will target celebrities and high-income earners. The same way, demographic segmentation plays a significant role in the market of bikes. Manufacturers of bikes are currently targeting the youths and the middle aged people at the same time they have also come up with bikes that have special features for women which make them easy to use. Another thing under this segment is that manufacturers are also coming up with different colors, for example, flashy and bright colors for the young. Psychological Segmentation Depending on the psychology, automobile manufacturers have created different models of their products. This has been witnessed mainly in the case of cars where they create more than two variants of a particular model and according to auto analysts, it has proved that this increase the sales. Those companies that manufacture luxury cars for instance Ferrari, Porsche, set their target on those people who are believed to have large disposable income and are of high status, this is realized through psychological segmentation. Behavioral segmentation is majorly done depending on the benefit that one is looking for in life, for instance, status, fame, and loyalty (Goldberg, 2005). There are also non-demographic segmentations of automobiles which are more complex than the ones discussed above and must be clearly be understood before the manufacturing and the sales of the automobiles are done. There are those people who purchase mainly for economic use; they tend to go for cars like the Falcon, Ford, Rambler America, and Chevrolet. They prefer companies where offers them the biggest savings or discount (Klepper, 2012). There are also those people who would wish to buy cars that are the best. They put more emphasis on the quality of the body, reliability, operational cost of the vehicle (Goldberg, 2005). This category would, therefore, prefer models like the Rambler and Volkswagen. It is, therefore, the responsibility of market directors to analyze the market segment of the automobiles to understand the requirements of every key segment and to know the main target market. Critical success factors affecting Automobile Industry Just like any other large industries, the American automobile industry needs to achieve success. This, therefore, calls for the industry to have some main critical success factors for them to realize long-term profitability. Several success factors have to be considered, and they include a positive image, distribution network, cash flow, compliance, and flexibility. Positive image This is one of the primary factors that are mostly used by consumers and stakeholders to define an automobile company are the public image. Every purchaser entrusts their safety in proportion to their income to a car company. What the consumers think about a given car company mostly affects the decision that buyers make when they want to buy a car. What influences the image of a given company are the advertising methods, what the previous customers say about a given company, the reviews from experts and the opinions from the general public (Motwani, et al, 2005). Distribution Network Every locomotive company needs to have a strong distribution network. This reason why this is an important factor of success is that cars and trucks are never sold directly to customers. The manufacturers mainly depend on the franchised dealerships who always offer showrooms to the locals. It is the company to choose those dealers who are knowledgeable and are reputable to sell cars and locomotives. The dealers are also the people responsible for building the image of a company (Motwani, et al, 2005). Therefore, they serve a greater part of the success of the locomotive companies. Cash flow Having a stable and a healthy cash flow is also bigger success factor for the automobile companies. When a company decides to sell his locomotives at a relatively lower price as compared to their competitors, they are likely to sell more cars even the profit margin may not be that big but the image would be useful to the public. The same way companies are advised to control their costs about the prices of the raw materials that they use and at the same time, it should also in line with production costs. Compliance It is upon the companies to ensure that the vehicles they are making and selling are in compliance with federal plus the local regulations. The rules include the emissions standards; the efficiency of fuel consumption and the last one is the level of safety (Motwani, et al, 2005). Even though it might cost less when producing these types of vehicles that perform marginally in such areas, the cost of safety or the mandated repairs imposed by the government might be much higher and very hard to anticipate. Flexibility One of the things that have led to some companies in the automobile industry to stay on top of their competitors is the ability to be flexible. Most of the car buyers change their preferences and buying habits according to the response to various factors like the state of the economy, fuel prices, and the introduction of new and modern technologies. It is best for the automobile companies to be alert in case of any changes and be able to follow the trends (Goldberg, 2005). This will help them in adapting quickly to the changes and come up with products that can compete in the market that is full of competition and at the same time meet the current and future needs and desires of their customers. Potential opportunities to grow the Automobile Industry Several issues affect automobile industry; they range from political, economic, social, and environmental issues. Some of these matters are threats to the industry while others are opportunities that can lead to the growth of automobile industry in the United States of America. The opportunities that the locomotives companies have currently are many; one of them is that the government is involved in making sure that it supports technological innovation so as to enhance economic conditions. Most companies, therefore, have the opportunity to expand their operations in other countries depending on the agreement that the American government has made (Kumar, et al, 2008). This provides them with the opportunity to explore foreign markets. America companies like Ford is one of the companies that is most likely to benefit from diplomacy that the government of US might create. Because of the improved infrastructure that in the developing countries, the remote macro-environment condition will lead to high demand for these vehicles thereby giving them the opportunity grow internationally. Due to the increasing strength of the United States’ economy and its dollar, their motor companies stand a chance of growing in the developing countries. The steady growth of the country’s economy provides a market for their automobiles in their market (Kumar, et al, 2008). One of the benefits that these companies have is that most of the raw materials that they use are from the United States this, in turn, forces them to maximize the opportunities that they have in foreign markets. The locomotives companies have the ability to grow and meet the increasing demands of their customers. They also have the opportunity of improving their services mainly the after sales services to attract a lot of clients. America is majorly known for its technological advancement, this can, therefore, create an opportunity for the motor companies to grow through the use of mobile services like marketing, and another issue is that they can use the advanced technology to improve their performance to beat their competitors like Japan and China (Klepper, 2012). Due to the environmental concerns, the American automobile industry can take advantage of this issue to create vehicles that are environmentally friendly. Another one is the creation of vehicles that do not use liquid gas; instead, they should come up with those vehicles that use other sources of energy that are easily available naturally. As it has been seen, the automobile companies in the United States of America have significant opportunities to grow and improve in the international automotive industry. If they can improve on their products innovation to deal with the opportunities that are connected to issues like climate change, the customer's demand plus other related issues in the automobile market then the industry stand a chance of being on top again (Kumar, et al, 2008). Conclusion The automobile industry is one of the popular manufacturers in the global market (Klepper, 2012). It used to be on top not until it started receiving competition from Japan and China which are currently the top manufacturers. The industry produces and sells the automobiles depending on the market segmentation which are geographic segmentation, demographic segmentation, psychological segmentation, and behavioral segmentation. Another thing is that these companies focus on the major factors that affect the success of their industry like a positive image, distribution network, cash flow, compliance, and flexibility. There are various opportunities that the industries are likely to enjoy following their advancement in the sector of technology (Kumar, et al, 2008). Considering the growing economy of US, and the powers of the government in the world’s politics they stand a chance of expanding their market to foreign countries. References Goldberg, P.K., 2005. Product differentiation and oligopoly in international markets: The case of the US automobile industry. Econometrica: Journal of the Econometric Society, pp.891-951. Kumar, S. and Putnam, V., 2008. Cradle to cradle: Reverse logistics strategies and opportunities across three industry sectors. International Journal of Production Economics, 115(2), pp.305-315. Klepper, S., 2012. The capabilities of new firms and the evolution of the US automobile industry. Industrial and corporate change, 11(4), pp.645-666. Motwani, J., Subramanian, R. and Gopalakrishna, P., 2005. Critical factors for successful ERP implementation: Exploratory findings from four case studies. Computers in Industry, 56(6), pp.529-544. Read More

People from these areas will use their resources to purchase tractors that they will use in farms. Similarly, the companies that deal with commercial vehicles would segment their market depending on the number of industries in a given region. Those companies that deal with the making of luxury cars would set their target in urban areas. Demographic segmentation This is also another important foundation of segmentation on the automobile industry. This provides a segment depending on the financial status of the buyer or the target market (Goldberg, 2005).

Other things that manufacturers concentrate on as they manufacture their cars are the age, status and many other social traits of the possible buyers. The companies that manufacture small cars will majorly target those people who are of the middle class. The companies that manufacture luxury cars will target celebrities and high-income earners. The same way, demographic segmentation plays a significant role in the market of bikes. Manufacturers of bikes are currently targeting the youths and the middle aged people at the same time they have also come up with bikes that have special features for women which make them easy to use.

Another thing under this segment is that manufacturers are also coming up with different colors, for example, flashy and bright colors for the young. Psychological Segmentation Depending on the psychology, automobile manufacturers have created different models of their products. This has been witnessed mainly in the case of cars where they create more than two variants of a particular model and according to auto analysts, it has proved that this increase the sales. Those companies that manufacture luxury cars for instance Ferrari, Porsche, set their target on those people who are believed to have large disposable income and are of high status, this is realized through psychological segmentation.

Behavioral segmentation is majorly done depending on the benefit that one is looking for in life, for instance, status, fame, and loyalty (Goldberg, 2005). There are also non-demographic segmentations of automobiles which are more complex than the ones discussed above and must be clearly be understood before the manufacturing and the sales of the automobiles are done. There are those people who purchase mainly for economic use; they tend to go for cars like the Falcon, Ford, Rambler America, and Chevrolet.

They prefer companies where offers them the biggest savings or discount (Klepper, 2012). There are also those people who would wish to buy cars that are the best. They put more emphasis on the quality of the body, reliability, operational cost of the vehicle (Goldberg, 2005). This category would, therefore, prefer models like the Rambler and Volkswagen. It is, therefore, the responsibility of market directors to analyze the market segment of the automobiles to understand the requirements of every key segment and to know the main target market.

Critical success factors affecting Automobile Industry Just like any other large industries, the American automobile industry needs to achieve success. This, therefore, calls for the industry to have some main critical success factors for them to realize long-term profitability. Several success factors have to be considered, and they include a positive image, distribution network, cash flow, compliance, and flexibility. Positive image This is one of the primary factors that are mostly used by consumers and stakeholders to define an automobile company are the public image.

Every purchaser entrusts their safety in proportion to their income to a car company. What the consumers think about a given car company mostly affects the decision that buyers make when they want to buy a car. What influences the image of a given company are the advertising methods, what the previous customers say about a given company, the reviews from experts and the opinions from the general public (Motwani, et al, 2005). Distribution Network Every locomotive company needs to have a strong distribution network.

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