The Global Automobile Industry
1. The steep sales decline that hit automobile companies worldwide in 2008 and 2009 started with problems in the United States housing market. What does this tell you about the nature of the global economy in the first decade of the twenty first century?
Answer: The economy today is indeed a global one in that events in one market influence events in another market. The rapid collapse of the global economy in late 2008 and early 2009 clearly illustrates that a crisis is one market can no longer be isolated within that market, and instead spills over very quickly into other markets. While the original crisis in the United States began in the housing ...view middle of the document...
This situation implies that there will be a new focus on markets in developing economies, as automakers seek to offset poor sales in Europe and the United States with more sales in countries like China, India, and Brazil. New joint ventures will emerge between established auto companies from the United States, Japan, and Europe, and newly emerging companies in developing markets. These partnerships could provide win-win situations as companies from the developed nations gain access to growing markets, and the companies from developing countries gain access to know-how, technology, and brand names. Already, some companies like Tata Motors and Geely have acquired established names like Jaguar and Volvo.
3. Would you characterize the automobile industry as a truly global industry where the same products can be sold worldwide, or is there still some need for local customization? What are the implications of this for the strategy and cost structure of automobile companies?
Answer: The automobile industry, while moving toward selling the same products worldwide, is still very much an industry that must respond to needs for local customization. Consumers in the United States for example, still prefer roomier vehicles as compared to their European counterparts, and price is an issue in many developing countries. Most automakers however, are trying to move toward a more global product line. For now though, the effort seems to focus largely on the “insides” of cars rather than on the trims. For example, Honda, like most other auto companies, builds several products using the same platform. Similarly, Ford is trying to reduce the number of parts in its product line, and now designers choose from just four steering wheel designs. It is worth to recognize the costs savings inherent in this type of strategy, but may also note that if manufacturers are not cautious they could end producing generic vehicles that fail to appeal to anyone in any market.
4. Why have American automobile producers lost so much market share to foreign competitors during the last three decades? What could they have done differently to arrest the decline?
Answer: American automobile producers lost so much market share due to:
• Many efficient foreign companies entered the market into direct competition with American producers.
• Many American producers lost their productivity advantages
• Increased labor costs
American automobile producers should have turned to the production of more fuel efficient...