Essay on Industry Analysis

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INDUSTRY OVERVIEW

The car & automobile industry in the U.S. primarily assemble automobile and manufacture automobile chassis. This mature industry has three main companies, which includes General Motor, Ford, and Chrysler. The main products and services included in this industry are: compact and subcompact cars, midsize and full-size cars, sports cars, and luxury cars. However, this industry does not include both light trucks and heavy trucks, such as vans, pickups, and SUVs (IBIS World, 2014). Although the U.S. car & automobile industry is expected to growth with a modest rate at 1.6% per year, the influence of the recession has lingeringly changed the entire industry in a significant way. During the recession in 2009, the industry revenue went down by 36.4%, and the Consumer Confidence Index also dropped by 22.1%. In response to the effect of the recession, automakers is expected to focus on “smaller, lighter and more fuel-efficient vehicles” (IBIS World, 2014, p.4) to remain competitive in the future.

THE CAR & AUTOMOBILE INDUSTRY’S MACRO-ENVIRONMENT

Economic Conditions

The car & automobile industry in the U.S. is strongly affected by one of the economic conditions - the cost of purchasing parts from suppliers. Because the major task of this industry is to assemble automobile and manufacture automobile chassis, companies from this industry need to buy other components to finish the task, which ranges from “energies and transmissions to radiators and electronics” (IBIS World, 2014, p. 21). Therefore, the cost of purchasing components is about 78% of the total industry cost, and this cannot be directly controlled by all the firms in the industry. In addition, the interest rate is being kept in a low rate due to the action that the Federal Reserve took in order to keep the stability of the U.S. economy (The Federal reserve, 2014). This macroeconomic condition not only can reduce the unemployment rate in the U.S., but also will recover the housing market, and directly increase the sales of US auto (Mergent, 2014). Social Forces

Social forces are significant to the car & automobile industry in the U.S., there are two main factor that are strongly relevant, which includes consumer expenditure and worker safety. With the recovery of the economy, the consumer expenditure in the U.S. begins to rise. The consumer spending was about two-thirds of the total demand in 2013 (Passport GMID, 2013). Also, according to the U.S. Bureau of Labor Statistics (2014), the consumer expenditure level and average income in 2012 was already exceed the level before the recession, and the higher the income quintile is, the more people in this quintile spend. In the highest income quintile, the second largest consumer expenditure increases was for transportation, which means consumer spend more on vehicle purchasing (Cobet, 2014).

Besides the consumer expenditure, worker safety is also considered as a significant problem that frequently happened in the plants of automotive manufacturing. “The industry's injury rate in the US is about twice as high as the national average” (First Research, 2014, para. 7).

Technological Factors

Technology is critical to the U.S. car & automotive industry, any changes happen in this industry will take considerable effect. Since this industry is expected to produce fuel-efficient cars in the future, and the computer technology help a lot on manufacturing and design cars, companies in this industry are focusing on develop computer technology (First Research, 2014). For instance, in 2009, General Motors announced that it was operating new computer technology to change its assembly plants to 24-hour basis so that it could work more efficiently and effectively, and this new technology can make GM become the standard-bearer (IBIS World, 2014).

In addition to new computer technology, the other changes in technology is that the emphasis on green technology. Recently, most of
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