Ford plus the World Car Industry Dissertation

1 . Changes in the structure of the vehicle industry

The 1965-1972 auto industry was a low competitive environment, and as a consequence was obviously a profitable market. Indeed, during this period:

пЂјIndustry rivalry was alternatively low:

The automotive industry was fragmented into independent national market segments and the principal concern of manufacturers was their domestic sales. As a consequence only some competitor had been disputing each market. The supply was meeting the need in a right manner: the production could give you the number of vehicles bought every year, without a key over-capacity. As a result, fixed costs were " under control”; no producer was planning to gain business in order to spread fixed costs over sales volume. Car models had been much more differentiated that through the 2000's. A lot of technologies were chosen for the various types available. As a result, models were considered as even more unique by customer, hence a less strong tendency to change between manufacturers. Suppliers electricity was nearly inexistent, while manufacturer were much " vertical integrated”, to reduce costs and maximize flexibility.  Oil price was not an issue, with clip or barrel under $15 during the whole period (expressed in 2006 US $). With no environmental matter, the alternative threat was very low. Low competition in national marketplace and substantial capital costs were mainly responsible for the low threat of recent entrant in each regional market. Additionally markets were far from being global, notably due to the transportation problems, which were around the verge to be solved: turning out to be global could have required during those times to completely transform the production procedure, as shipping components might have been excessively complex.

Among 1972 and the beginning of the 2000's, the world auto market offers faced a major upheaval, which primarily is due to one major phenomenon: " globalization”. The GATT and other international contract have offered a structure for global trades, like the automobile market. Moreover the slow expansion rates of the industry offered incentives pertaining to manufacturer to watch out for new market segments. This triggered a major change in the industry structure:

пЂјThe competition intensified through the period,

The introduction of completely new manufacturers of market that utilized to be steady: the new production, management and transportation strategies gave a boost to the competition ambiance. Excess capacities were added during the 80's and 90's, when Western companies tried to enter foreign markets (and most notably the US), causing high set costs that had to be protected. This substantial fixed costs problem was reinforced by rising fresh models development costs. Car model standardization induces significantly less differentiation, consequently an easier buyer switch among manufacturers. Furthermore the fact marketplaces have internationally the same structure among different countries (luxury car/SUV/salient/low-cost cars) make it easy to contend around the world. Consumers have been needing more " esthetic” customization, requiring even more flexibility inside the manufacturing technology. That has lowered the benefits of financial systems of scale. New traders have appeared and are still frightening to enter. Despite the major capital requirements to enter the automobile industry, several fresh competitors possess emerged to each market section during the last 40 years. On the one hand, growing countries have created national manufacturers, often guarded by their very own legislation prior to deciding to travel global. On the other hand, existing multinational do have the cash instructed to enter new segment market, as the SUV case shows. The suppliers negotiating power has received a tendency to increase, and more and even more manufactured made a decision to outsource the component manufacturing. This is strong by the fact that several aspect supplies have become as big as auto manufacturers. Buyers have never recently been so well informed about versions, performance,...



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