British Motor Industry and Government Strategy Essay

British Motor Industry and Government Strategy - Essay Example Usually they are classified as Tier 1, Tier 2 and Tier 3 suppliers etc., where Tier 1 represents the highest level of components such as the engines and the powertrains. At the assembler level, there used to only a handful of big players from countries such as the US, Japan and a few from the European Union (EU) countries. This situation, however, has now changed with many Eastern Europe countries and Asian countries such as China and India entering the automobile industry. The output side of the assemblers, also called "post-manufacturing" or "downstream", consists of distributors, dealers and the service and repair shops. This level accounts for a significant volume of employment, where in UK alone, about 73% of the employees in the automotive industry come from the automotive supply and distribution chains. This is out of an approximate total of 780,000 employees (Parker & McGinity 4). The world automotive industry has gone through several ups and downs from its inception to present. From the 1950s where the United States dominated with a 100% market share amongst the 3 giants General Motors (GM), Ford and Chrysler, it changed to a position where US lost its share to 52% while Japan cemented her place with a 43% share by 2005 (BBC "The Car Industry"). Since the beginning of this decade, the industry has seen the emergence of several new players predominantly from China and India and some Eastern Europe countries. The demand for energy efficient vehicles has gone up rapidly in the recent past and this has forced many auto manufacturers to invest time and money in more environment-friendly technologies. Context of Five Forces In analysing the present global trends, The Five Forces Theory (Porter 1979) offers sound criteria for an encompassing environment study. Rivalry among competitors Competition in the global auto industry has intensified with many new players entering the market. In fact, the European Foundation for the Improvement of Living and Working Conditions (EFILWC) states "global competition" as one of four main drivers of change for the European auto industry (5). There is stiff competition coming from the new Asian manufacturers, led from China. For example, "In North America, domestic automakers have seen a steady decline in their share of the market. In the ten months to October 2004, the market share of Asian-owned carmakers in the US rose to a record 34.5%" (Asia Pacific Foundation of Canada 5). Threat of new entrants The new entrants are again primarily from Asia with China and India in the forefront. Automakers such as the Chinese FAW, Chana and the Indian Tata and Maruti are fast catching the markets, especially in the Asian region. Their makes of small cars with high fuel efficiency are particularly appealing given the present situation in the world oil market. Threat of substitutes Sky rocketing fuel costs can push the customers more in to public transport with a direct consequence of shrinking the demand for personal automobiles. The car and SUV markets can get hard hit by this. There is speculation