The advent of globalization has brought significant changes in the market trends in the automobile industry. As the automobile industry is currently suffering from slumps due to the rising prices, taxes, competition and the oil price hikes, it is important to define what the car manufacturers are doing to alleviate the effects of these various changes. One important aspect that the automobile manufacturers are doing is to follow Japanese models of buyer-supplier relations that have been proven to sustain the hindrances that are involved in venturing the global market.
Upon realizing this, US car manufacturers are incorporating these models and are now slowly gaining pace in the global market. In addition, the issue of car prices has also affected some car manufacturers as they joined the tough competition in the global market. The factors that affect these car prices should also be given emphasis as these involve the bigger picture of sustaining their business in the long run. Thus, globalization had pushed the automobile industry to improve on these aspects.
With improved buyer-supplier relations and competitive car prices, the automobile companies should continue to strive in enhancing future research on these two aspects to develop the competitive advantage they need in the global market. Factors Affecting Economics of the Globalizing Automobile Industry With the current market trends around the world, the automobile industry has suffered slumps due to the rising prices, taxes, competition and most of all, the recent skyrocketing oil price hikes.
As the modern global automotive industry traverses the paths of principal manufacturers, Ford, General Motors, Honda, Volkswagen, Toyota and Daimler-Chrysler, which all operate in a global competitive marketplace, it is seen that there’s still much hope to alleviate economic conditions that affect them. It is suggested that the globalization of the automotive industry, has greatly accelerated during the last half of the 1990’s due to the construction of important overseas facilities and establishment of mergers between giant multinational automakers (Hiroaka, 2001).
And, there’s no reason that they could repeat that achievement. Globalization and the current mergers in the automobile industry has been correlated with today’s controversies over high petrol prices and fuel-guzzling SUVs in the huge American market. According to The Economist (September 8, 2005), this picture of the automobile industry only offers a partial detail of what future holds for industry as a whole:
It may well be fully mature in markets such as North America, Europe and Japan, where over-capacity continues to sap profitability. But globally the industry is set for huge expansion with the motorisation of China and India. Within a few years China will replace Japan as the second-largest national market after America. Some experts predict that over the next 20 years more cars will be made than in the entire 110-year history of the industry.
In the same report, Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University in Britain, enlightened that this growth will create the need for 180 new factories, each producing 300,000 cars (and light trucks) a year—in effect, almost doubling the production capacity of the global industry to over 110m units annually. Thus, today’s car plants will need to be “renewed, retooled, refurbished and replaced to remain competitive. There is nowhere for the inefficient to hide. ”
According to Takayasu and Mori (2002), the automobile manufacturing is an industry in which it is difficult to achieve optimized procurement, production and sales on a global scale. However, major assemblers began to form strategic partnerships based on capital relationships in the period from 1998 to 1999, and since then there has been an accelerating trend toward the creation of structures that allow manufacturers to supply a diverse range of vehicles tailored to consumer needs in markets throughout the world.
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