Automobile Industry Essay

†¢Key drivers of the automobile sector are economic conditions, governments and regulations, consumer demands and interests, globalization and technological innovations †¢Generally, if the economic conditions are constant and good, people will seems willing to buy vehicles more than ever in all around world. In contrast, if economic conditions are bad, sales graphs will reverse and companies start to lose money. Firms should decide right production numbers in every condition and this capacity exactly depends on economic circumstances. †¢People are more conscious about what they except from a car and firms must satisfy these needs to survive in this sector. Even luxury automotive brands start to produce low fuel consumptions engines, otherwise they will collapse rapidly. †¢As usual, globalization is one of the crucial key drivers of automobile industry like every sector. After the globalization, brands start to do partnerships with each other to enter the different markets and they develop new technological innovations more cheap and useful all around the world. †¢In addition to these factors, governments’ regulations are one of the major determinants of global auto industry. The country’s’ legislation about emissions, environment and recycling are the key factors of brands investments. In European Union, the mutual regulations order that emission rate is lower than other regions and as a result of that firms should produce accordingly to these legislations. The Automobile Market †¢The automobile industry has become important after the globalization because people want to travel with more comfortably, safely and rapidly with their cars. Concordantly, while automobile sector is developing in every part of it, the global transportation sector benefit from positively. For instance; Rolls-Royce is producing both plane and car motors and Volvo is producing car and sea boats engines too. So, firms help to enlarge and develop in every transportation tools, not only cars. †¢The automobile industry consists of fuel, tire, and insurance firms. Also, mostly the luxurious brands are working with ranking fashion companies such as; Gucci(Fiat) and Hermes(Bugatti) and sound system companies like as; Bang & Olufsen (Audi, Mercedes, BMW, Aston Martin) and Naim (Bentley). †¢On the other hand, after the globalization, automobile brands start to work together in some regions all around the world. They invest more money on R&D departments and sharing their knowledge to improve all transportation vehicles. †¢Germany, United States, Japan and Korean producers are the bestsellers all around the world. These countries mostly take control all over the world. Such as: Volkswagen is one of the biggest companies in automobile sector and it has got several brands such as; Audi, Lamborghini, Bentley, Bugatti and Seat. Company produces car for every segment. †¢In addition, especially for the last decade, market start to tend to produce more clean motors which do not harm to the environment. Also, they try to produce completely using electricity engines for all vehicles and using solar panels. As a result of that, the concept of climate change cause occurs a new market in automobile sector. Key Country Markets †¢In this chapter of report, I will mention about Japan, United States, Germany and Korean automotive producers because Toyota and Honda from Japan are the best and most well-known brands, Volkswagen from Germany is the head of locomotive in this industry for all parts of it, GM and Ford are the biggest companies from United states and Hyundai, which is becoming more powerful in everyday from Korea. †¢Volkswagen is the second best seller in 2012 after the GM and they are in front of Toyota. Generally, German cars are best vehicles that showed by automobile specialists from all over the word in every segment. Volkswagen, (if we look at the Exhibit 1) has got several different brands like; Lamborghini, Bentley, Audi, Bugatti, Skoda and Seat. They have product range from low-consumption cars to the luxury vehicles, as a result of that they are producing well- quality vehicles. †¢Toyota and Honda are the most favorable brands from Japan against to American and German manufacturers. Toyota Corolla is the world’s best seller mass production model and Toyota has got successful models as like Corolla too. In addition, Honda is one of the biggest and accomplished gasoline engine producers. Also, these two Japan brands are investing their money on hybrid and electric motor more than ever other brands. †¢GM is best seller brand in 2011, they sold approximately ten million cars and they have got various vehicle models. GM has got various brands such as; Chevrolet, Opel, Vauxhall, GMC, Buick and Cadillac. Also Ford is the one of the biggest key driver of the market. †¢Hyundai is one of the most developing auto brands for last decade. They start to produce well engines, comfortable and good looking cars. On the other hand, Hyundai is one of the biggest partnerships of Kia (%49. 2) which is the second biggest brand from Korea. †¢As we can see clearly, these 6 brands from 4 country of the world are the leaders of this sector. Also, they own various brands in their group and they are using this superiority against to the other brands. Sector Trends †¢Brands should produce low-consumption engines and obey emission and governments’ regulations to survive. †¢Nearly all automotive producers are using same technology on their vehicles; they need to work on these researches together to be more beneficial for humanity. For instance; Mercedes-Benz and BMW are sharing R&D departments studies with each other and both of them working together to develop new technologies. †¢People are expecting more useful cars from producers like, they want both athletic and reliable vehicles, as a result of that firms has got new opportunities to create new model segments based on these requirements. †¢Transportation vehicles are developing in every day and automobiles is one of the crucial parts of this situation. Firms are increasing their sales number in every year and they need to satisfy their customers’ requirements in a perfect way. †¢Climate change is one of the determinants of this sector, so firms should pay attention to this issue seriously, they need to obey governments’ regulations and produce new technologies which will be not harmful for nature. †¢Hybrid and electric engines will be the most popular trends in this sector next decades; people would prefer clean engines and low-priced energy, so sector must be improved itself rapidly. Key Success Factor. †¢In this sector there are several success factor which is decided by people and worlds’ requirements; †¢Firms must produce more secure cars because, if we compare transportation systems, motorway is the most dangerous one and, the number of accidents’ proofs it. Brands should work together on security services. For instance; Volvo which is one of the securest brand on the world, claims that after 2020, any people will die in a traffic accident that drive a Volvo. †¢Engines success based on the fuel-efficiency, not harmful for the environment and being long-life. These conditions should be priority for brands R&D departments. †¢Practicality needs to be developing parallel with previous items. People do not want to send various tools in the future; they will only buy contently vehicles. The Future Outlook and Expectations of Automobile Sector †¢People will need cars in the future more than now, producers’ need to satisfy this demand with new technology engines, they should create alternative energy resources which will be not harmful for the environment and firms need to develop safety features to prevent traffic accidents. †¢In the future people need transportation systems because of the longer distances, in every transportation way need to develop it. †¢Brands need to improve driverless vehicles because market will tend in that way. INTRODUCTION AND OVERVIEW The Automotive Industry Overview The automotive industry is one of the crucial sectors for humanity and it has been developing from industrial revolution to now. After the first engine was discovered in 1885 by Karl Benz, engineers found various inventions to make easier of people life. Industry had developed too much nowadays, engineers work on different technological tools and they need to show pay attention many different regulations in today’s world. At the beginning, the most important part was the engine but now automotive industry involves a wide range of business lines such as; manufacture, design, development, marketing and selling motor vehicles, motorcycles. Last year, there were approximately one billion cars which are registered on the world and this number is increasing sharply year by year. Parallel with that, consumes gasoline and diesel fuel multiply with every new car addict to the traffic. On the other hand, this sector employees thousands of people and creates new opportunities to undeveloped countries. In addition to these information’s about automobile sector, we should absolutely mention about the economy of which it creates and process. Currently, mostly the all automotive brands are owned by developed countries and they made their substructure investments all around the world, especially undeveloped countries. After the globalization, firms decide to set-up their factories at low skilled labor force countries. However, this decision affects both sides positively, producer’s limits cost and undeveloped countries’ economies start to develop. According to the OICA (The International Organization of Motor Vehicle Manufacturers that, â€Å"If vehicle manufacturing was a country it would be sixth largest economy in the world. † in 2007. This shows that the contribution of automobile industry to the undeveloped countries’ economies. Also, the industries turnover 2 trillion dollars and if we comparing of this turnover of GDP with other economies in the world, proof that it can compete economic power of Italy, France or the UK. India is one of the greatest examples of the success at their economic improvement. Tata Motors, which Indian automobile brand owned Jaguar and Land Rover last year and they developed it perfectly in 2 years. After these 2 years, Jaguar and Land Rover increased their profitability nearly in half and when we think about these two brands are luxury brands, these numbers are spectacular. On the other hand, firms expanding nearly 85 billion dollars on Research & Development departments. These budgets shaped by customer’s demand, so this sector is one of the innovative ones and it still produce new technologies. However, automobile sector has got unfavorable situations like; economic crises. If we make a research about when firms sales numbers decreased or companies made loss we will realize that on that era, world or the some regions is in economic crises. For instance; last biggest economic crises in 2008, when we look at the production number, it will decrease nearly %12. 7 compare to the previous year. These numbers are same with the other economic crises and automobile sector affect from them firstly. Key Country Markets United States. Todays’ world America is the one of the world’s biggest automotive producer with two brand; GM and Ford. GM has got various sub-brands in itself from different segments. These two brands sell their cars all over the world and both of them are most knowable automobile producers. However, in 2008, worlds’ biggest economic crises occurred GM was nearly bankrupt in an unbelievable way. This means, world would lost one of the old and essential brands, thousands of people would lost their job and American economy got hurt again after the Lehman Brothers. Hopefully; government decided to help GM and they saved the firm quickly. Japan Toyota is the most valuable automobile producer in the world; its net value is 131 billion dollars. Also one of the models, Corolla is the best seller model one the world and it has been sold nearly forty million from 1966 to 2012. In addition to the Toyota, Honda is another successful Japan auto brand too. They have got accomplished sales numbers and firm is producing one of the best gasoline engines. According to the consumers, Toyota could be the best competitor against to the German auto makers. Firm is producing in same quality with Germans but they are selling them cheaper than German brands. This is Toyotas’ major successful strategy also, company uses Japans’ engineering and technology which is the worlds’ best ones. They produced worlds’ first hybrid car and investing a huge part of their money on electric, clean and cheap motors. Germany The locomotive of the industry is Volkswagen right now and it will not change for two or three decades. Only the Volkswagens’ value is 76. 3 billion dollars and company has got several brands like; Audi (28. 5 billion$), Porsche (15.3billion$), Lamborghini, Bentley, Bugatti, Seat and Skoda. This German brand is producing most usable models with low-consumption engines, low prices and the safety of German engineering. Volkswagen is shaping the trends of the industry and other brands are following it right now. Firm has got different models from every consumer group and they make it an opportunity to be successful in the future. Korean Asia’s’ economy is the world’s fastest growing economy in nowadays. They are growing better than Europe and United States, as a result of those brands of this region are developing too. Hyundai is only the one of them; they are creating new models, developing current models and enter new markets. The firm move considerably forward when we compare a decade ago, their substructure and technological systems improver very well, also; they are producing more reliable and comfortable vehicles. This Korean brand will be one of the serious auto brands in the future if they are going in that way. Economic Impact of Automobile Sector The automotive industry has a big impact on every economy, it consist nearly every economy in the world. Every country in the world has got a part from this sector and thousands of people work in this industry. It is really crucial for transportation sector because, firms are using or developing same motors on different transportation vehicles. On the other hand, auto sector has got great impact on countries economy. If a country has got a factory or some service area about this sector, it will include a huge part of country’s’ economy. For instance; America worked really hard to save GM from the 2008 economic crises, they spend too much money because, if GM bankrupted, America’s economy will affect in deeply (if we look at Exhibit 3). Also, Ford decide to sale Aston Martin and Volvo at this era, these two brand had not good sales number and they will be harmful for the company if they do not sale them. Automobile brands have a great impact on country’s economy just like banks, executives should be careful about this issue seriously because it can be affect from economic crises easily so, they need to take a decision in long-term. Market Segmentation The automobile industry has a got long operation process; it has various segments in it. Firstly, R & D department research what people need or what they want from a vehicle. After that, this part start to make prototypes or create stereotypes which engineers and designers can build on these examples. Designers work on cars aerodynamic, shape and how it looks. In addition, engineers work on substructure parts of the car such as; lights, engine, transmission and safety systems. While they are producing this prototype, they do various tests on car and finally they can send it to the dealers. Dealers, order number of cars and they prepare launches to introduce cars to the customers. After the sale of car, the service department starts to interest with car. They call them to the services periodically and customers can visit them anytime they have a problem with their car. Consequently, this industry has got major segment such as; R & D department, designing and crating new technologies, before sale and bring together with market and customers. Finally, service department take care about our cars problem. Five Force Analyses Threats of New Entrants The automobile sector is could be most risky market on the world because you need to much money to invest on it, heritage is really important for customers and this sector is the first sector that affected from economic crises. Otherwise, without any new technology or price policy you will not survive much long and if someone decides to build up an automobile company, he/she will definitely work with local government. On the other hand, if someone wants to get this sector, he/she has got a change with new technological features. For instance; Fisker and Tesla are the new entrants at this sector and they invest their money on clean, hybrid and electrical engines. They also try to design good-looking car with solar panels and other recyclable energies. Bargaining Power of Suppliers In this case bargaining power of suppliers is not really strong. It is not powerful as healthcare sector or another sector because if people do not want to buy a private car, they can choose other transportation ways or the can choose nothing. However, in healthcare sector people absolutely need doctors, hospitals or medicine to survive but it is not same for this sector. In addition, globalization affect make peoples’ life easier and humans are used to it and buying a private car became a priority after purchasing a house. Generally, if a person owns a house, he/she will buy a car with how much money he/she got. This is the strongest part of the sector; unfortunately it has got negatives parts too. Bargaining Power of Buyers These sectors’ trends and demand is shaped by customer’s preferences, so the bargaining power of buyers is really strong. If humans do not like a model, they will not buy it and producers stop to produce it but if they like it producer need to produce it as much as it can to be successful. Right now, the demand on this sector is low-consumption engines and be not harmful to the environment so producers start to produce models and engines in this way, otherwise they cannot be able to sell a car. Availability of Substitutes In automobile industry, the availability of substitutes is not actually but there is only one way to change it is create new substructure concepts in the sector. For instance; Tesla and Fisker do that in a perfect way, they only focus on hybrid and electric engines and people recognize them with these concepts at everywhere. You cannot change industry but you can be able to change its direction. Intensity of Existing Rivalry There are many brands on the market, even in one country own more than one automobile brand, as a result of that the intensity of existing rivalry is really high. As I mentioned before that, there are five leader brands in the market but other big or small brands are successful as like them too. The most important think is the design of the automobile but now it has got no meaning because firms are usually work with same designers and models are not changing too much even in different brands. However, the most competitive concept is price policy according to the government’s tax payments systems. Key Success Factors for Automobile Sector There are different types of key success factor for automobile sector are based on the region, substructure features, purchase power. Producers need to show pay attention to these factors because it will determinate their sales numbers and profitability. The most important factor knows the region very well. I mean dealers and head quarter of the brand should be aware of the consumers’ requirements. Also they need to sale cars which are not be against to the governments’ legislations. For instance; European Union has got sharp and certain laws about carbon dioxide emission, so dealers need to focus on engines which are consuming few. However, United States not sign Kyoto Protocol, so they do not have any legislation for emissions right now, dealers can focus on high mass engines. In addition to the region, substructure features are crucial for auto makers because people always want to buy a car which has got advanced features even they will never use them. However, conscious consumer will demand low-consumption engines and brands need to produce engines according to that demand. In other words, firms need to decide their target audience perfectly and producing substructure features with these conditions. Lastly, the third factor is purchase power. In my opinion, this factor is the most crucial determinant in this sector because every brand starts to produce in same quality vehicles. However they need to know country’s economies and sale their models in that way (if we look at Exhibit 4). For instance; America one of the highest purchase power countries in the world and they really like to own cool, luxurious and spectacular cars, they can buy two three or even more than these number cars. In contrast, European nations have got the same purchase power but they want to buy one or two cars and they are looking to being useful, low consumption and quality vehicles. The Future of Automobile Sector In the future, transportation systems will be developing in all around the world because people want to move from A to B faster, comfortably, safely and cheaply. Producers need to know these requirements and produce car with these features. Firstly, brands need to focus on low-consumption cars, I mean hybrid and electric engines because they are cheaper than current technology and governments provide laws for this situation. Secondly, they need to produce safety cars than now because people will demand on secure system in the future. On the other hand, they need to produce usable cars such as Audis’ All Road, they have been developed for all road conditions and you can use them only in one car. Consequently, people will never forget or reject driving a car but producers need to answer climate, people and governments requirements. If someone produce a car with low price and costs with cover a long distance in a comfortably they will become the most successful brand in the world.