Saturday, May 12, 2012

World Car Market Case Study

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Introduction


Globalization is based on the belief that the world is becoming more homogenous; distinctions between national markets are fading and for some products may actually disappear. As a consequence of globalization, firms are able to capitalize on the blending of national markets through attacking these markets with universal strategies and products. Firms are also able to capitalize on the disparities of production costs between nations through locating their production facilities in the low cost markets; although this is less of a benefit in the automotive industry due to the high logistics costs involved in transporting vehicles between markets. In the automotive industry, globalization can have tremendous cost benefits. European car manufacturers have not fully adapted to this concept.


This assignment will answer and analyze the following questions


· What must European car manufacturers do in order to face the global realities of their industry to survive and succeed?


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· Why have neither the two largest car manufacturers in Europe, General Motors and Ford, been targeted by European Commission moves?


· What will the realignment of the auto industry mean to governments, carmakers, and customers?


Tackling global realities


The European industry faces several challenges to its prosperity. “Namely the need to close the gap in productivity, quality and technology with both the Japanese car plants in Europe and with those US producers who are adopting lean production systems; and the need to construct a strategy for a post-national automobile industry, which is global in nature and not just European” (globaledge.edu). Both European manufacturers and suppliers need to adopt significant structural changes to meet these challenges, since the global nature of the Japanese production system means they can no longer hide behind trade barriers and tariffs. The global strategy of Japanese car companies not only allows them to avoid the instability of exchange rates, but also enables them to avoid the consequences of foreign protection.


European car manufacturers must adopt the Japanese industry’s manufacturing structure. It now has the opportunity to restructure and expand its capabilities in order to build a world-class manufacturing and supply base. Europe has an industrial culture based upon engineering and design that is increasingly in demand in the modern world and has the desire and willingness to learn from its competitors. The immediate goal of the industry must be to establish mutual trust and understanding between the assemblers, suppliers and the governments of Europe in order to reestablish the automotive sector as the main engine for economic growth and prosperity for the twenty-first century. “General Motors is the latest company to warn of a slowdown in Europe” (bbcnews.com) Europe must act now if they want to begin to rapidly grow once again.


In reference to the quote in the book, ‘Comeback The Fall and Rise of the American Automobile Industry’, “while Detroit decried free trade as a threat to its existence, free trade is what saved Detroit by forcing to improve”, I completely agree with the authors’ statement. It forced Detroit to improve efficiency, quality and service. “The books’ heroes are the managers who awoke early to the changing climate and fought for years to get their companies to adapt” (businessweek.com).


General Motors & Ford in Europe


According to the text, “two of the largest car manufacturers in Europe are General Motors and Ford. Neither has been targeted by European Commissions moves, and they are not generally seen as a threat” (Czinkota & Ronkainen, 001, p. 1). I believe that the European Commission does not target General Motors and Ford because they are each one of the world’s largest carmakers. For this reason, these two manufacturers help increase and develop the European car market. Also, General Motors and Ford came into Europe over sixty years ago. They are established corporations in Europe, which have lead Europe’s car manufacturers its success since then.


Realignment of the European auto industry


At the present time only Ford and General Motors can be considered as truly European companies, with facilities spread throughout Europe. All the European producers are dependent on the European market for sales and supplies but all have markedly different commercial and practical interests which influence future common policy.


The European market strategy for post 1 is challenging car producers to consider how they move from being national producers, largely dependent on sales in their home market, to becoming European. At the same time there will have to be a European initiative to replace national barriers to trade. As the text mentioned, the “1” process has had little or no effect on real costs in the industry. Nonetheless, the European Commission will, however, have to guarantee a level of free-trade and movement throughout the community at the same time as trying to avoid trade imbalances and rising unemployment. “At the end of last year, General Motors decided to close one of its Vauxhall car plants in Luton, Bedfordshire, as part of a Europe-wide programme of cutbacks” (bbcnews.com).


Collaboration is the key to survival in the next economy. Automakers must be prepared to leverage relationships with suppliers, distributors, technology alliance partners, and customers more intensively. Only those firms that skillfully develop and manage the capabilities of this extended enterprise will thrive. I believe that the realignment will allow merging companies to drive greater efficiency and will serve as an intelligent use of the resources available. This will ensure increases of production effectiveness and competition, while enabling plants to demonstrate its commitment to continuous improvement. Hopefully the realignment will also involve greater employment.


Conclusion


As indicated earlier, the European auto industry faces several challenges to its success. During the past decade, Japan has added to the global overcapacity problem. This is now being resolved by using lean production. This outcome clearly raises concern in Europe because of implications for national competitiveness and employment as a result of plants. A clear European Commission policy will be needed to cope with the Japanese challenge. A strategy is required to ensure maximum integration of Japanese production in Europe as it comes into Europe, taking into account national economic, political and social concerns.


The European auto industry clearly faces the most critical challenges in its history, not only from the arrival of the Japanese plants, but through the global revolution in manufacturing. Europe must realize that globalization and realignment are the keys to overcoming the challenges they are facing.


References


1. BusinessWeek.com web site. Retrieved September 8, 00 from the World Wide Web http//www.businessweek.com/18-4/pre4/b400.htm


. Czinkota, M. R., & Ronkainen, I. A. (001). International Marketing (6th ed.). Fort Worth, TX Harcourt.


Globaledge.com web site. Retrieved September 8, 00 from the World Wide Web http//globaledge.msu.edu/KnowledgeRoom/FeaturedInsights/0018.pdf


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