The Global Car Industry-An Analysis of Macro Environment, from the Case study by Nick Potter

Essay by amitabhtB-, March 2005

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The car industry environment is very complex due to the large number of product markets, buyers, suppliers and customers, which spread across the globe. As such, it has often been described as "the industry of all industries".

There are various forces that influence this environment. Hence, this report analyzes some of the political, economic, socio-cultural and technological trends, key to understanding their impact on the industry, with particular reference to the Western European market.

First, the macro environment is analysed to point out some of the major impacts in the entire industry, revealing political and technological forces to be the driving forces of the industry.

This is then followed by a competitive analysis of segments in the industry divided on the basis of various strategic groups. Such segmentation helps in grouping some of the companies and assessing the impact of key variables common in that segment. It is revealed that brand perception is a key mobility barrier that helps companies maintain their competitive advantage in each of the segments, by reducing threat of new entrants.

Following is the detailed analysis based on the above dimensions.

Macro Environmental Forces on the Car Industry

Particularly three trends can be identified to have major impact on strategy formulation for the 21st century in the industry. First, there has been greater importance by governments of various countries to balance their ecological and economic objectives as compared to the past. Secondly, the economic downturn coupled with unemployment has lead to a reduced consumer confidence. Lastly, the technological innovation has been quite rapid and extensive in the last decade.

The following paragraphs give a more detailed analysis of these trends.

Political Forces:

The changes in government policies and legislation in certain western European countries will have significant impact on the level of demand in the industry.