Macro-Environmental Forces in Australian Industry - Case Study Example

Running Header: Macro-Environmental Forces in Australian Industry Student’s Name: Instructor’s Name: Course Code: Date of Submission: Table of Contents Table of Contents 2 Introduction 3 Macro-Environmental Forces in Australian Industry 4 Concern for Safety in Cars 4 Climate Changes-Greenhouse Gases Emissions 6 Change in Consumers Needs 8 Conclusion 10 References 11 Introduction Motor vehicle industry in Australia has several companies that manufacture motor vehicles as illustrated by Business information Agency Staff (2001). They include sports utility vehicles (SUVs), buses, cars, vans and medium, light commercial vehicles, heavy and special purpose highway trucks including fire trucks. These vehicles are used for commercial and private purposes. Also included in this industry is manufacture of automotive engines. Australia is one of the countries that have facilities to design and even produce a car from clean sheet to dealers for sale. Australia is famous of designing and producing ‘large’ sized vehicles that have led to downturn in Australian markets leading to several cutbacks such as closure of Mitsubishi Motors Australia in 2008. Currently, they are three major vehicle manufacturers in Australia that include Ford Australia, GM Holden Ltd, and Toyota. Toyota Australia is a subsidiary of Toyota Motor whose headquarter is in Japan. Previously, other major companies closed down their manufacturing operations in Australia due to varying reasons like competition and other business external environmental issues. They include British Leyland, Chrysler Australia, Mitsubishi Motor Australia, and Nissan Australia. However, they are a number of small producers of cars in Australia such as AlphaSports, Goggomobile, and Caldwell Vale among others. This report will analyze on three major external environment and its impacts on the vehicle industry. Such external environment factors include concern for safety in cars and on the roads, contributions of Motor vehicles to green house gas emissions, and changes in consumer’s needs for motor vehicle due to demographic, urbanization and psychological trends. The Automobile industry is facing many challenges currently in Australia (Victor 2004). Macro-Environmental Forces in Australian Industry Concern for Safety in Cars Safety in cars and on the roads is a major concern that has a major impact on the vehicle industry. There are two types of safety that should be put into consideration. They include active and passive safety. Active safety is the technology of assisting or preventing crash while passive safety is the components of the vehicle including seatbelts, and physical structure of vehicle that assist in protecting those occupying the vehicle. One of the challenges is reducing vehicle weight while maintaining or improving crash safety as well as overall performance without having an effect on the affordability. In ensuring that vehicle manufactures meets the demands for safety, motor vehicle safety act has been set up. This is to ensure there is reduced risk of death, damage and injury to property and the environment. In Australia, safety systems featured in compact/mid-sized vehicles are driven by high level of safety awareness in the society. This has led to introduction and increase of new-sophisticated safety features into the vehicle industry. The standard features on vehicle manufacturers include ABS systems. Others include ESP (Electronic Stability Programs) systems that are gaining ground. This is expected to be offered on first-class segment motors. Advanced Safety Devices like ACC were launched in Australia 2009-2010 (Geoffrey & Francis 2002). The safety systems are expected to increase greatly the cost of manufacturing vehicles. However, it is crucial to note that high increase in manufacturing cost may kick the business out of competition. On the other hand, failure to incorporate safety aspects in cars may make the product unacceptable by the government inspection teams as well as the society. Safety is a major factor that requires to be given first priority when designing and manufacturing vehicles of any type. The need for high safety consideration has led to incurrence of high manufacturing costs of various motor industries. High safety expectations have led to an increase in the cost of manufacturing vehicles and assembling in Australia leading to closure of some industries. This is because they have been unable to sustain the high cost as well as stiff competition from other manufactures (Ricky 2010). The external force in terms of safety has increased largely the need to manufacture safe vehicles. The vehicles manufactured are supposed to take into consideration the cost/benefit ratio (CBR). This forces the industries to put more resources into safety aspects that subsequently increase the manufacturing cost. Achievement of high safety in vehicles calls for use of approved manufacturing materials including safety belts among others. This has an impact on the overall manufacturing cost on the vehicles. Failure of a vehicle to meet the safety requirements can lead to recalling of all batches of vehicles. This is very expensive for the car dealer or manufacture because this results to high costs. It is mandatory for any vehicle manufacture who fails to meet certain safety requirements to recall all the vehicles back in order to collect the problem. The use of safety cars has become a major factor behind the success of the vehicle industry in the current competition. Failure by any manufacturer to meet high safety requirements of their vehicles can lead to stiff competition that may it move out of market. Therefore, this calls for proper strategies in ensuring the vehicle meets the expected high safety as a way of ensuring it survives competition. In trying to overcome the forces because of meeting safety demands, vehicle manufacturers have adopted various policies and strategies set by the government as a guide to manufacturing safe vehicles. However, despite the increase of manufacturing cost in trying to take into account the aspect of safety, it is crucial as a way of satisfying their customer segment as well as trying to increase the number of consumers. Therefore, Australian vehicle manufacturers are manufacturing their vehicles using standard materials and guidelines. Vehicle manufacturers in Australia are using Advanced Safety Devices in ensuring that their vehicles are safer. This is an assured way of ensuring their business survival. In adapting the necessary measures while putting into consideration the factor of safety, Australian Companies will be able to survive the external forces of safety concerns on cars and roads. Taking into consideration the aspect of safety is very likely to have a major significance in the marketing of the vehicles in that more people are likely to accept a vehicle with high degree of safety (Sharon 2006). Climate Changes-Greenhouse Gases Emissions Changes in climate have become one of the most serious threats of environment that the world is facing today. Greenhouse gas is a gas in the atmosphere that absorbs and emits radiation back into atmosphere. Some of the global gases include carbon dioxide CO2, methane CH4, nitrous oxide N2O, and chlorofluorocarbons CFC. In Australia, proposed or existing regulations concerning vehicle emissions take into consideration the use phase (driving) of a total life cycle of a vehicle. This is an indication that lightweight vehicles have reduced consumption of fuel leading to reduced GHG emissions when other things are constant (European Conference of Ministers of Transport 2007). All vehicle manufacturers are supposed to ensure their vehicle they manufacture produce less greenhouse gas (GHG) emissions. Transport plays a great part towards the emissions of green house emissions. It is the second emitter of gas after energy. Vehicle manufacturers have been faced by a great challenge due to changes in climate. There have been increased regulations on vehicle manufacture as Australian government set rules and regulations for the manufacturers. This is towards ensuring there is overall reduced production of GHG from the transport sector. Such strict rules and regulations have led to a great effect on the cost of manufacturing of the vehicles. Such regulations have led to rise of vehicles that use less fuel that consequently produces less GHG. This has even led to rise of other types of technologies including electric driven vehicles. This has made many manufacturers to be faced with a lot of competition forcing them to re-adjust their manufacturing systems and design. The rise of electric vehicles in ensuring reduced pollution has gone to an extent of changing the consumers’ perception on the need for a fuel-efficient vehicle. This has led the preference of customers making some prefer less polluting such as electric driven vehicles. This has become a major blow to the vehicle manufacturers who have been forced to change their design and ways of manufacturing. Australian government has given an online Green vehicle guide providing ratings on the environmental performance of vehicles sold in Australia. Government has advised people willing to buy a vehicle to buy the one that is less polluting to the environment. This has led to vehicle manufacturers changing their manufacturing design in order for them to able to survive in the rising competition. Vehicle manufacturers have been mandated to manufacture vehicles that are fuel-efficient. This adds extra costs to already existing manufacturing cost. Failure by the manufacturers to meet those requirements may lead to his vehicles becoming less preferred hence losing out to the competitor’s. The vehicle manufacturers have responded to this change in climate and the need to reduce green house gases by designing and manufacturing plug-in hybrid electric vehicles according to Curtis & Judy, (2010). These use rechargeable batteries that get power from an external source. Toyota is one of the vehicle manufacturers in Australia that has launched its plug-in Prius. This is to enable it be able to sustain itself against in terms of competitive advantage. Toyota has gone ahead to convert its Prius into Szencorp. This is as way of improving its brand as well as maintaining its customers segment despite the external environmental pressures. Mitsubishi is another manufacturer of vehicles that has launched its greener technology car. Mitsubishi has an innovative Electric Vehicle (i-MiEV) that it launched into the market as a way of maintaining its competitive advantage. These changes will enable the firms to be able to overcome the problems because of changing climatic conditions of the world. Taking into consideration the aspect of green house gas emission and reduction of pollution is likely to have a major impact on the marketing strategies of the firm. More people are likely to accept firm’s vehicle when it takes into consideration the aspects of climate conservation (Seth 2009). Change in Consumers Needs Another major external force is changes in the needs of consumers for motor vehicle due to urbanization and other demographic and psychographic trends. This can be referred to as consumer buying decisions process. This is the process undertaken by consumer concerning market process. Increased migration to urban areas has greatly influenced the buying behavior and perceptions of the customers. Urbanization and change of living style has led many people preferring certain kind of vehicle models. This has a lot of impact on many vehicle manufacturers in Australia where they have been forced to redesign their models. In urban areas, others easily influence people towards buying or being associated with a certain type of product. This has made car manufacturers to make new models of vehicles in order to satisfy this rising customer segment. Failure to introduce new models satisfying the customer is likely to make the vehicle manufacturers lose in business or even be unable to market efficiently. Psychological factors are internal to a person and they usually generate her/his purchasing behavior. Such include perception, motives, attitude, personality, and learning (William & Ferrell 2007). Perception on certain type of vehicle is a major determinant of the buying behavior of various customers. This great influence forces vehicle manufacturers to re-strategize their design and marketing ways in order to accomplish and please customers. Consumers form an attitude towards a brand on belief that certain brands are more superior to others. Lifestyle is an indicator of the way people live and even express themselves based on their activities, opinions, and interests. Lifestyle is influenced by personality and demographic factors. Lifestyle has a great influence on the type of vehicles that people buy in Australia. The higher the lifestyle, the more they prefer good models (Shiv & Alfred 2007). Customer buying behavior is a great challenge to the vehicle industry. This is because when customers get a bad perception about a certain product; they may end up refusing to buy. However, marketing should play a key role in influencing and changing the perception and buying behavior of the customers. Understanding the buying behavior of customers is crucial for various vehicle industries as it enables them design-preferred models. Urbanization has made many young generations of customers to have a negative attitude and perception on the some type of old models of vehicles. There is also a perception that certain type of models are for the old people. All vehicle manufacturers are considering this strong force in their efforts to satisfy customers. This call for vehicle manufacturers to consider the aspects of customers that requires to be taken into consideration when designing and marketing (William, Robert, & Jack, 2009). Extensive marketing and learning has been undertaken by the vehicle industry in order to know the attitudes of the intended customers. This was a great step towards making strategies crucial for the successful vehicles selling. Understanding the attitudes and buying behavior of the customers also played a key role in reducing any barriers that arose as a result. Market analysis and market research was undertaken in order to know the type of models that people preferred and in accordance to their age. Marketing was carried out in such a way that it changed the customers’ perception by informing them on the advantages of existing models and why they fit them. Such steps reduced the effects of those external environmental forces among the vehicle industry (Philip 1989). Conclusion In conclusion, it is important to note that any organization that wants to become successful must analyze its external environment and forces facing it. Australian vehicle industry is one of the business sectors that face many external environmental forces such as need for safety for a car and in the road, customer perceptions or buying behavior, and climate changes. Australian industries have changed their marketing strategies, designing, and manufacturing process. This is towards maintaining a competitive advantage as well as maintaining their customer by not losing them to the competitors. In maintaining a high safety level of the safety, Australian industries have adopted modern safety devices and system towards ensuring their vehicles are safe to its users or occupants. On the other hand, Australian vehicle manufacturers are starting to manufacture greener vehicles that are electrically powered in trying to reduce the impacts of emissions on the environment. They have also carried out extensive market research towards knowing the perceptions and preferences of their customers. References Business information Agency Staff. (2001). Industry, Motor Industry/Automotive Australia. Sydney: Business Information Agency. Curtis, D. & Judy, A. (2010). Electric and Hybrid cars: a history. Michigan: McFarland. European Conference of Ministers of Transport. (2007). Cutting transport CO2 emissions: what progress? New Jersey: OECD Publishing. Geoffrey, B. & Francis, G. (2002). Australia reshaped: 200years of institutional transformation. London: Cambridge University Press. Philip, K. (1989). Marketing in Australia. California: Prentice Hall. Ricky, W. (2010). Management. New York: Cengage Learning. Seth, L. (2009). Build Your Own Plug-in Hybrid Electric Vehicle. New York: McGraw Hill Professional. Sharon. C. (2006). ‘Safety climate in an automobile manufacturing plant: The effects of work environment, job communication and safety attitudes on accidents and unsafe behaviour’, Personnel Review, 35(4), pp.413 – 430. Shiv, S & Alfred, K. (2007). Creating valuable business strategies. New York: Butterworth- Heinemann. Victor, T. (2004). Fundamentals of motor vehicle technology. California: Nelson Thomes. William, M & Ferrell, O. (2007). Marketing. London: Cengage Learning. William, M., Robert, J & Jack, R. (2009). Business. London: Cengage Learning. Read More