Global automobile manufacturing industry 2016-2017. Key drivers of change

Global automobile
manufacturing industry
2016-2017
Key drivers of change
Group1:Globalautomobile
manufacturingindustry
1

Assignment title:
Global manufacturing industry 2016-2017
Key drivers of change
April 2017
Groupmembers:
Arianit Osmani
Armend Ukshini
Elheme Azemi
Ilir Bekteshi
Teuta Pula
2

Introductionto global automobile
manufacturingindustry2016/2017
What is happening in the automotive
industry today?
3

Global sales of passenger cars are forecast to hit 77.7 million vehicles in 2017 (see Fig. 1). This number is expected to
reach up to 100 mil till 2020 thanks to the mature and emerging markets. [1]
Car sales in Europe have experienced a decline during the recession of 2008-2009. But, the car sales are back to the
pre-crisis level due to the increased demand in markets of Europe, China and US. Along with China, the United
States is counted among the largest automobile markets worldwide, both in terms of production and sales. At the
other hand Brazil and Russia is experiencing a decline in car sales (see Fig. 2). [1] India market is on rising.
Over the next decade, Internet-connected car technologies and autonomous vehicles are set to stir up yet another
revolution in the automotive sector. In 2016, some 40 percent of U.S. respondents aged between 25 and 34 stated
that they were willing to use fully autonomous vehicles, presumably because they consider autonomous vehicles to
be safer than conventional cars. [1]
References:
[1] https://www.statista.com/topics/1487/automotive-industry/
0
10
20
30
40
50
60
70
80
90
90-99 00-13 14 15 16 17
Fig. 1 Global sales of cars globally
per year
0
10
20
30
40
50
60
70
80
90-99 00-11 12 13 14 15 16
Fig. 2 Global sales of cars by region
South America
Asia
Eastern Europe
Western Europe
North America
4

China remained the top light vehicle producing country in 2015. Domestic manufacturers such as Dongfeng, SAIC,
FAW (First Automotive Works) and BAIC - which is now in a joint-venture with Daimler - are gaining market share.
Japan, Germany, South Korea and the United States are home to the major manufacturers of passenger vehicles. The
leading car manufacturers worldwide include US-based General Motors and Ford, Germany’s Volkswagen Group, as
well as the Japanese automakers Toyota Motor Corporation and Nissan (see Fig. 3). [1]
In terms of revenue, Volkswagen, Toyota and General Motors topped the list of major automobile makers in 2015,
while the automotive supplier industry was dominated by Bosch, Continental, Denso and Magna (see Fig. 4). [1]
The world’s largest automakers include General Motors and Ford, the Volkswagen Group, as well as the Toyota Motor
Corporation, Honda and Nissan (see Fig. 5). [1]
References:
[1] https://www.statista.com/topics/1487/automotive-industry/
2,279.50
2,982.04
3,032.65
3,034.48
4,543.84
4,865.23
5,170.17
6,396.37
7,485.59
7,988.48
9,872.42
10,083.83
BMW
PSA
Renault
Suzuki
Honda
Fiat
Nissan
Ford
GM
Hyundai
VW
Toyota
Fig. 5 Leading motor vehicle
manufacturers based on production 1n
2015 (in 1000 units)
60.65
81.32
101.54
102.25
106.68
120.92
121.62
149.56
152.36
165.80
236.59
236.60
Peugeot
Hyundai
Nissan
BMW
SAIC Motor
FCA
Honda
Ford
GM
Daimler AG
Toyota
VW
Fig.4 Leading motor vehicle
manufacturers based on revenues in 2015
1.30
1.55
1.59
1.97
2.02
2.22
3.38
4.14
4.16
5.71
7.83
21.08
Chez Republic
France
UK
Mexico
Brazil
Spain
India
South Korea
US
Germany
Japan
China
Fig.3 Global sales cars by region in 2015
5

The global automobile manufacturing industry in numbers [2]:
References:
[2] https://www.bloomberg.com/news/articles/2017-04-10/tesla-passes-gm-as-musk-s-carmaker-becomes-america-s-top-valued
Trends:
1. Electric cars with the leading automaker TESLA ($ 50.8 billion/greater for around $ 64 million) which has
achieved a market capitalization greater than Ford and greater than GM ($ 50.8 billion) in the US.[6]
2. Artificial intelligence incorporated to make the intelligent and connected vehicle for the 21st century.
Automotive Industry Overview Units
2017 projected international car sales 77.73m
2016 worldwide production of cars 72.11m
Volkswagen is second leading motor vehicle producer 9.87m units
VW is the leading automobile manufacturer based on sales 10.31m
Sales of passenger cars in the U.S. 6.87m
How many motor vehicles did China's automobile industry sell in 2016? 28m
Manufacturers Amount
Revenue of Volkswagen $236.6bn
Toyota's FY 2016 revenue ¥28.4bn
General Motors: FY 2016 revenue $166bn
Suppliers Amount
Size of the automotive supplier market worldwide €620bn
The world's largest automotive supplier Bosch
Number of Bosch employees in the Americas 41,037
Continental FY 2016 revenue €40.55bn
FY 2016 global number of Denso employees 151,775
Top 5
automobile
producers:
Fig. 6
6

The automotive market segmentation
7

Market segmentation
“Market segmentation is subdividing a market into distinct and homogenous subgroups of customers where any
group can conceivably be selected as a target market…dividing the market into smaller groups of customers or
organizations in which each segment has a common characteristic such as needs or behavior” by Kottler (2005) [3].
Market segmentation in the automobile industry is complex and divided in many segments. The market is composed
from the new and used cars markets. This market is also valid for after-sales service as well as spare parts sales. [4]
References:
[3] Kotler, P. 2009, Marketing management, European edn, Pearson Prentice Hall, Harlow.
[4] https://www.slideshare.net/yash902007/segmentation-of-car (partially adapted by the group)
Geographical
Europe
EU
W
U
Asia
Ind
ia
Chi
na
Jap
an
US
CA
LA
Bra
zil
Psychograph
ic
Eco
nom
ic:
Self-
effi.
Mo
der
ate
Lux
ury:
Self-
publ
icist
Demographic
Ag
e
20s
30s
40s
50s
60s
Income level
Lo
w
inc
om
e
Me
diu
m
inco
me
Hig
h
inc
om
e
Family Life-cycle
Mi
ni
Hat
chb
ack
Sed
an
Cro
sso
ver
SU
V
Technology
Die
sel
/Pe
trol
Ele
ctri
c
Hy
bri
d
Product
line
Nic
he
Bro
ad
line
Global automobile industry market segmentation
Fig. 7
8

Market segmentation
The automotive industry has experienced some
incredible growth over the past couple of years. The
industry is highly consolidated — a handful of major
corporations own nearly all of the world's major car
brands (see Fig. 8)[5]
This graphic does not include every car company and
every brand. But it does include the biggest and most
influential ones that consumers are likely to come across
in Europe and the Americas.
From the chart we see that almost every company
competes with car models in almost all the car segments
available. This is to increase the market share and market
potential (see Fig. 8).
References:
[5] https://http://www.businessinsider.com/car-companies-of-the-world-2015-2
[6] https://www.forbes.com/pictures/mkk45ekfi/1-toyotacorolla-201112/#350d0d734e16
Toyota Corolla remains the best-selling car in the world
with more than 1.2 million units sold in 2016. [6]
Fig. 8
9

Brand mapping
References:
Economy
Luxury
High-
income
Low-
income
Perceptual brand mapping for automobile industry.
The relationship between the low-income/
high-income families and their preferences/
ownership for car brands (see Fig. 9).
Fig. 9
10

Critical successfactors in the automotive
industry(CSFs)
What People Look for When Buying a Car?
11

industry(CSFs)
References:
[7] J.D. Power, 2017 Report
[8] J.D. Power, 2016 Report
[9] Car-Brand Perception Survey, Consumer Reports, 2014
[10] Nieuwenhuis , P., Wells P, ed, 2015, The Global Automotive Industry, Cardiff University, UK Wiley, UK
2017 Top Reasons Shoppers Buy/Avoid a Vehicle:
Reliability is a top purchase reason, increasing to 59% in 2017 from 55% in 2016. That’s the highest in six years and
the third-most often stated purchase reason behind exterior styling (62%) and interior styling (61%). [7]
2016 Top Reasons Shoppers Buy/Avoid a Vehicle:
Exterior styling is the top reason shoppers buy a particular model (59%).
It is also the top reason to avoid a particular vehicle (31%), followed by the vehicle costs too much and interior
styling (18% each). [8]
This list ranks the seven key factors by how important they are to consumers when buying a new car. The percentage
is based on the numbers of respondents who said the factor was among their top three priorities (see Fig. 10) [9]:
Factor 2014 (%) 2013 (%)
Quality 90 90
Safety 88 88
Performance 83 83
Value 82 83
Fuel economy 81 81
Design/style 70 65
Technology/innovation 68 65
According to Nieuwenhuis and Wells (2015) vehicle preferences play a key role in shaping the automotive
Industry. [10]
Fig. 10
12

industry(CSFs)
References:
[11] http://www.reliabilityindex.com, 2017
What is car reliability/quality?
Reliability Index figure combines several elements - cost, inconvenience and rate of failure. A car that won't let you
down is important to almost every motorist, and two things affect the view on reliability.
How often it needs repairing, and how much it will cost you to put right. A car could break down five times, but only
cost you £50 each time to fix, or it could break down once and set you back £1,000. [11]
Fig. 11
13

industry(CSFs)
References:
[12] European Commission’s Mobility and Transport Report, 2016
[13] EC Mobility and Transport Report, 2016
Should safety be considered as the main CSF?
Road fatalities are an indicator of the role of safety in the consumers’ buying decisions (see Fig. 12) [12].
For every death on Europe's roads there are an estimated 4 permanently disabling injuries such as damage to the brain or
spinal cord, 8 serious injuries and 50 minor injuries . [13]
Fig. 12
‘Our vision is
that by 2020 no
one should be
killed or
seriously injured
in a Volvo car’.
Hakan Samuelson,
President & CEO at
Volvo cars
14

industry(CSFs)
References:
[13] Ford Automotive Survey 2016
[14] www.autobytel.com/car-buying-guides/../10-best-mpg-cars-for-2016-130642/
Should fuel economy be considered as the main CSF?
Many consumers see fuel efficiency as a key factor determining their buying habits when it comes to the automotive
industry (see Fig. 13) [13]. The fuel economy of an automobile is the fuel efficiency relationship between the distance
traveled and the amount of fuel consumed by the vehicle.
Fig. 13
Country Fuel efficiency
India 66
Taiwan 80
Australia 80
New Zealand 80
Malaysia 80
South Korea 80
China 58.6
Vietnam 69.3
Thailand 68
Asia Pacific Average 68
Model
2016 Toyota Prius
2016 Mazda Mazda 6
2016 Honda Civic
2016 Chevrolet Malibu Hybrid
2016 Ford Fiesta
2017 Mitsubishi Mirage
2016 Scion IA
2016 Chevrolet Volt
Fig. 14
According to a survey done by the portal Autobytel, the 2016 Toyota Prius Model seems to be the most fuel-efficient car (see
Fig. 14). [14]
15

Strategic group analysis
Main strategic group analysis
16

References:
[15] Guerzoni, M. 2014, Product Variety in Automotive Industry: Understanding Niche Markets in America, Springer, New York, London
[16] Johnson, G. Scholes, K. Whittington, R., 2008, Exploring Corporate Strategy 8th edition, Prentice Hall
In 2003, 34 companies in the American market produced hundreds of models of cars for 5 different market segments
(passenger cars, pick-up trucks, mini vans and vans, sport utility vehicles, sports cars). For the passenger vehicle
market alone, 148 different models were on offer. Moreover each model is available in several trims and each trim in
different colours with an increasing possibility of customising the product with dozens of ad hoc additional features
[15]
Strategic groups are organisations within an industry or sector with similar strategic characteristics, following similar
strategies or competing on similar bases. [16]
17

References:
[17] Car-brand-perception-survey, Consumer Report 2014
Quality/Value
Fig. 13
18

References:
Safety/Performance
Fig. 14
19

References:
Technology/Design
Fig. 15
20

PESTEL
The macro-environment: Political,
Economic, Socio-cultural, Technological,
Environmental and Legal
21

PESTEL
References:
The global automobile industry is mainly an assembly industry where the different manufacturers and brands are
interconnected and where every final product has received a number of inputs throughout the production process
(Dicken, 2007).
During the recent years, the automotive industry has suffered essential changes in the concept of the ‘traditional car’.
The pressure on the industry regarding pollution, safety and quality are getting higher and higher. The demand for
electric vehicles is increasing and the attitude of the buyers toward mobility has changed essentially.
Below we will present the PESTEL Analysis of the automotive industry, showing the impact of all external factors that
playing a crucial role in the performance of this industry.
22

PESTEL
Fig. 18
23
Automobile
industry
POLITICAL
•Governments favoring low emission
vehicles
•Taxes on luxury vehicles
•Changing political regimes
•Wage regulations
•Government roles in R&D
•Protectionism policies
ECONOMICAL
•Economic sustainability
•Change of monetary policies in different
countries
•Steady car sales growth
•Changes in crude oil prices
•Fast growing economies
•Growing of middle class
•Overall growth of GDP
SOCIAL
•Change in age distribution
•Increased awareness about carbon emission
•Labor mobility
•Lifestyle changes
•Declining preference for fuel energy
•Family-size based preferences (small car, SUV
etc)
•‘Sharing cars’ concept
TECHNOLOGICAL
•Smart and connected cars
•Semi-autonomous and autonomous cars
•Internet
•Request for more fuel efficiency cars
•Government research spending
ENVIRONMENTAL
•Direct effect of automobiles in the
environment
•Climate change awareness
•Preference to use clean energy
•Mobility attitudes and alternatives
LEGAL
•Laws related to Safety and Quality
•Pollution laws
•Patent trolls
•Laws for importing vehicles and
subsidizing the local production

PESTEL– Politicalfactors
References:
Fig. 18
24
LOW EMMISION VEHICLES - The Governments in the developed countries are favoring the low emission vehicles. Very strict
rules and regulation has been approved for fuel efficiency, heavily affecting the Industry.
Changing political regimes – The new established regimes can change “the rules of the game” which directly affects the
automobile Industry. The 20% tax of import from Mexico that TRUMP applied lately, affected the US car manufacturers, by
pushing them to stop the production in Mexico and produce the cars in USA, with the higher labor costs. BREXIT and changes in
the political influence in EU, have created a new environment.
Regarding the Insecure geopolitical environment, Axel Thümler, Automotive Audit Lead Partner says: “ The fear of political
changes has become as strong as the fear of terrorism, war and natural disasters”*
Taxes on luxury cars - EU and UK have increased the taxes for luxury cars and are subsidizing the environmental-friendly
vehicles. Norway has declared that from 2025 only electric cars can be registered for the traffic.
Wage regulations – Companies tries to reduce the costs and the political factors can have a significant role. China have become
very attractive because of the lenient wage regulatory.
Protectionism policies – The Developed countries are applying several protectionism policies for the domestic producers.
Several countries applies different taxes for import cars, letting the local brands to keep the market share. In 2008, Obama
saved the auto industry in USA, by giving 80 billion USD as a bailout to major car manufacturers. The similar support has been
given to OPEL in Germany, saving the company from bankruptcy.
Government role in R&D – Many governments are investing heavily in R&D, trying to create competitive advantage in the
automotive industry. Gross Domestic Spending on R&D is in average of 3.2% of the GDP**
Source: *KPMG 2017 ** OECD.org and Eurostat

PESTEL– Economicfactors
25
ECONOMIC SUSTAINIBILITY – The
automobile industry was hardly hit by the
recent economic crisis. Particularly, the crisis
had a direct impact on sales of luxury
vehicles. However, the economy is now
stable the Worlds GDP will reach 3% in the
period 2017-2020.
CHANGING ECONOMIC POLICIES – Many
governments applies a different are changing
the economic policies about taxation,
budget, money supply, interest rates and
labor market, which are directly affecting the
car manufacturers worldwide.

References:
26
Steady car sales growth – The sales figures shows a
steady growth of car sales worldwide. In 2017 the car
sales will increase for about 0.5%.
Changes in crude oil prices – The open conflict in
Middle East and the new Cold war between USA and
Russia have resulted in the dramatic fall of the crude
oil prices. In 2015, OPEC increased the production of
the crude oil, reaching the historical lowest price per
barrel.
Source: *KPMG 2017 ** OECD.org and Eurostat

27
Fast growing economies – Political and
economic reforms, which have made
headlines around the world, have
supported this economic growth. There are
many countries who have reached 6% of
GDP growth in 2016. This economic growth
has directly reflected in the car industry.
MyanMar and India are seen as the new
‘markets to focus’, after a slowly stagnation
of the Chinese economic growth.
Growing of middle class - Growing Middle
Class Encourages Automotive Market
worldwide. The developing world’s
“emerging middle class” is a critical
economic and social actor because of its
potential as an engine of growth,
particularly in the largest developing
countries such as China and India but also
in sub-Saharan Africa. The size of the
“global middle class” will increase from 1.8
billion in 2009 to 3.2 billion by 2020 and 4.9
billion by 2030. The bulk of this growth will
come from Asia.
Source: WORLD ECONOMIC FORUM

PESTEL– Social factors
28
Change in age distribution – Age distribution and job attitudes in various population is an important factor
in the automobile industry. The car makers should constantly have an overview of the global market
changes on this two factors. The EU-zone and China are aging, many countries in development have a
relatively young population.
Increased awareness about carbon emission – Have a direct impact in the buyers’ decision-making when
it comes to buy a new car. Declining preference for fuel energy may have a significant impact on car sales
in the future.
Labor mobility – People are constantly moving from home to their preferred workplace. They often cover
a large distances. The distance to workplace has often determined the mean of transport. Fast trains and
low cost airlines have reshaped the form of transport in the developed countries, which can be seen as a
direct threat of substitute for the automobile industry.
Family-size based preferences (small car, SUV etc) – The size and type of the car is close connected with
the size of the family. The Family in the developed countries is going small all the time, which need to be
taken into consideration. Also, the concept of sharing a car, may lower the demand for new cars.

PESTEL– Technologicalfactors
29
IoT connected cars – Technology has become the
important determinant of market share in the
automotive industry. The challenge of the new
era is building a car which is connected with many
platforms and devices. The only field that the car
makers are competing very hard is technology,
which has given the opportunity to new entrants,
who are planning to have a market share in this
industry (Tesla, Lucid, Apple, etc).
Semi-autonomous and autonomous cars –
Producing cars who are full autonomous is the
objective of almost all car producers. All
companies are investing in R&D to create a full
autonomous car, and the best in this ‘war’ will
win the market.
Demand for more fuel efficiency cars – Increased
awareness about pollution and carbon dioxide
footprint, has changed the attitude of the buyers
when it come to buy a new car. Car makers
should use the technology and innovation to
create a competitive advantages in the market.

PESTEL– Environmentalfactors
30
The laws related to environment and carbon
emissions are growing around the globe.
The automobile industry had to focus on the
technological innovations to lower the fuel
consumption and to develop hybrid models and
electric cars. The threat to existing car makers is
coming directly by 0-emission cars. Tesla Motors,
a new entrant in the automobile industry
overcome GM within a very short period. Several
new brands, such as Lucid, Faraday Future, Rimac
etc. have become a serious threat for the
traditional car makers.
The governments in developing countries are
subsidizing cars with the low emissions, and
pollution tests have grown stricter.
Being aware for climate changes, people are using
substitute to fuel cars: public transport, bicycles,
etc.

PESTEL– Legal factors
31
Laws related to Safety and Quality – Many countries are applying strict laws related to safety and Quality. This is
pushing the car makers to invest in technology and innovation. Because of safety issues, many car makers are often
recalling thousand of vehicles, making a huge costs and impact on the brand.
Pollution laws – are pushing the car makers to produce a low carbon emission cars
Laws for importing vehicles and subsidizing the local production – There are countries which restrict automobile
importation and subsidizing the local brands, making very hard for other brands to compete in the market.
Patent trolls – are a big trouble for the automobile industry. Millions of dollar are paid yearly by car makers, to
companies who allege misuse of intellectual property, wining on licensing fees and court judgments. Patent assertion
companies filed 107 lawsuits against automakers and car suppliers in 2014

Porter’sfiveforces
Power of new entrants, power of
substitutes, power of competitive rivalry,
power of buyers and power of suppliers
32

References:
[18]
[19] http://www.bmiresearch.com/blog/the-challenges-facing-new-entrants-in-the-premium-auto-sector
[21] http://www.moneycontrol.com/news/european-markets/news/business/markets-business/-1757179.html [ 27042017 14:09 ]
Power of new entrants - LOW
a. The threat of new entrants into automobile industry is particularly low, since the automobile industry is
matured. The greatest barriers to entry in the automobile industry is the high amount of capital that is required
to purchase physical manufacturing plants, raw materials, and hire/train employees. [18] Porter, M. E. (2008)
b. The entries requires huge capital to manufacture automobiles that need to develop cars with high-end
specifications requires a substantial Research and Development (R&D) budget. [19]
c. The cost of electronics and software content in autos was less than 20 percent of the total cost a decade ago.
Today it is as much as 35 percent, according to studies by Manfred Broy, a professor of informatics at Technical
University, Munich. [20]
Power of substitutes- MEDIUM
a. Threat of substitutes for automobile industry we consider as medium threat. There are some substitutes like
public transportation , buses, trans, flights and trams. [21]
b. Threat of Oil price is the major to euro zone, exports from the organization and petroleum exporting countries (
OPEC) drive and demand for European Union ( EU), as they shrink, oil prices will rise, leaving the Euro Zone
facing an energy supply problem. [22]
33

References:
[23] https://hbr.org/1979/03/how-competitive-forces-shape-strategy
[26] http://www.moneycontrol.com/news/european-markets/news/business/markets-business/-1757179.html [ 27042017 14:09 ]
Power of competitive rivalry - HIGH
a. According to Porter (2008), rivalry among existing competitors takes many forms, including price discounting,
new product introduction, advertising campaigns, and service improvements. [23]
b. Since the exit automobile industry barriers are high. Keep companies competing even though they may be
earning low or even negative returns on investment. [24]
c. Advances in technology have caused significant advances , Porter (2001) has argued that while the Internet is an
important new technology, it is no more than a complement to ways of competing. [Porter, M. E. (2001). ][25]
d. Industry growth is flat, and numerous competitors with similar market shares are fighting for leadership, and all
the players have huge capital leverage, the companies has to be careful for better marketing at the point of
purchase and for keeping loyalty by offering with new features [26]
e. The automobile industry needs its very own eco system. An independent virtual cloud ecosystem is needed to
balance the power between end-consumer, digital tech giants are traditional offline hard-ware companies like
auto manufacturers. [27]
34

References:
[28] http://marketrealist.com/2015/02/suppliers-power-increasing-automobile-industry/
[29] https://www.strategyand.pwc.com/trend/2017-automotive-industry-trends
[30] https://strategiccfo.com/buyer-bargaining-power-one-of-porters-five-forces/
[31] https://www.strategyand.pwc.com/trends/2015-auto-trends][ 27042017 14:40]
[32] https://strategiccfo.com/buyer-bargaining-power-one-of-porters-five-forces/
Power of suppliers - MEDIUM
a. Automobile production requires thousands of parts. A large number of suppliers are needed to manufacture all
of the parts that go into making a vehicle. There are many players in the auto supplier industry.
Traditionally, suppliers’ bargaining power has been very low. However, the scenario changed slowly over the
years. [28]
a. The bargaining power of suppliers in the automobile industry is going large through high technical dependence.
Many automotive companies are highly involved in developing the new technologies that their customers
want, whether it is the human–machine interface for infotainment, autonomous features, or the components
for electrification. [29]
Power of buyers – HIGH
a. The bargaining power of buyers in an industry affects the competitive environment for the seller and influences
the seller’s ability to achieve profitability. [30]
b. Consumers appear to be rethinking their long love affair with individual automobile brands and viewing cars
more as transportation machines with good and new features, technological and performance features . That
willingness is also affected by the waning of product differentiation, due partly to a general increase in vehicle
quality throughout the industry. [31]
c. The switching costs, the cost of switching from one seller’s to another seller’s are low, the bargain power of
buyers is high. This change typically happens when customers buy a new car. [32]
35

References:
CONCLUSION
We evaluate the Rivalry among existing competitors and bargaining power of
buyers that are with High power . The high power of buyer enable forcing down
prices , and demanding better quality and more service, it means that it can be
driving up costs.
However, the force of threat of new entrants is low , thus there is a chance to
protect the actual profit levels of firm in the market and inhibit additional rivals
from entering the market. Moreover we evaluate the others two forces as
medium bargaining power of suppliers, and threat of substitute are medium. The
threat of suppliers we evaluate it as medium but w we think that it is going
grow.
According to the Five Forces analysis, the combined effect of the factors is the
strong force or bargaining power of customers. The firms needs to ensure that
Its products match the expectations and preferences and of its target customers,
when it comes to consumers, it is clear that their expectations are already different
today than they were 10 years ago since the technology is growing day t o day,
now is the time of the transport sector to make a similar choice , there is no
grantee that traditional, well established and respected companies have a
guaranteed place on the markets of the future. So change is here. It's
happening, and it won’t be stopped. That is because the opportunities of these
technologies are simply too attractive.
Competitive Rivalry
HIGH
Buyer Power
HIGH
Supplier
Power -
MEDIUM
Threat of
new entry
LOW
Threat of
Substitution
MEDIUM
Fig. 19
36

MichaelPorter’s (1990)National Diamond
framework: Japan
The national economy of Japan
37

framework: Japan
References:
[20] Porter, Michael E. "Can Japan Compete? Revisited." Porter Prize Conference, Hitotsubashi University.
Fig. 20
38

framework: Japan
References:
[21] HOLROYD, C. 2008. Reinventing Japan Inc.
[22] DAVIES, H. & ELLIS, P. 2000. PORTER'S COMPETITIVE ADVANTAGE OF NATIONS
Fig. 21 Group work reflection
Challenges faced by Japan from transferring it’s economy to more technology-oriented stage of development
Fig. 21
chances
Government Influence
Innovations in key sectors such as
automobile development industrial
processes and transistors were
fostered by the national leadership by
setting ambitious goals on economic
growth.
Holroyd (2008) argued that the
transformations and innovations in
Japan have been acquired due to the
enhancement of post-secondary
education, coordination of the
government, academic and
corporate activities, and the society
is willing and ready to accept
innovative products and services.
39

framework: Japan
References:
[23] Snowdon and Stonehouse., 2006
Fig. 22 http://reports.weforum.org/global-competitiveness-report-2015-2016/economies/#indexId=GCI&economy=JPN
Fig. 23 Group work, Highest waiting subindexes based on WEF GSI 2015-2016
Global competitiveness Annual Ranking Nation: Japan
Performance
In terms of the Economy Japan has managed to be position
6 with notable improvements mainly in the macroeconomic
environment due to the return of moderate inflation which
has been brought by the increase in the consumer tax.
The following are some of the reasons why Japan performs
excellently in more complex competitiveness:
•businesses are highly sophisticated (2nd),
•employing unique products and production processes (1st)
•with large control over international distribution (2nd) and
•benefitting from the global best local suppliers (1st)
•high-quality research institutions (7th)
•company spending on R&D (2nd),
•an excellent availability of experts in sciense & engineers
(3rd),
•overall highly innovative environment (5th).
Japan remains an early and eager adopter of new
technologies (13th) and boasts one of the highest
penetration rates of smartphones (5th)
Fig. XX
The Global Competitiveness Index makes use of two measures:
Business Competitiveness Index and Growth Competitiveness
Index.
First one captures the determinants of the level of GDP per capita
and hence country’s standard of living.
Second one tries to capture the dynamism of an economy. [23]
Fig. 22
Fig. 23
40

framework: Japan
References:
Fig. 24 https://hbr.org/2013/09/the-new-improved-keiretsu
http://reports.weforum.org/global-competitiveness-report-2015-2016/economies/#indexId=GCI&economy=JPN
http://japan.kantei.go.jp/97_abe/Documents/index.html accessed: 26april 2017, 2:22PM) documents june & feb
AOKI, K. & LENNERFORS, T. T. 2013. Whither Japanese Keiretsu?
Keiretsu were regulated by specific
laws, cooperation was almost
compulsory. 2 types: 1. Horizontal or
financial, 2. Vertical or supply chain,
where OEM has deep relationships
with key suppliers.
Porter’s (1990) national diamond framework: Assessed as a System
41Fig. 24

framework: Japan
Since 1999 only Nissan had drastically cut off ties
with keiretsu, and so considered not to be a pure
domestic company. It was only after forming an
alliance with Renault that Nissan was able to
create a competitive purchasing policy using
global benchmarking.
42Fig. 24
References:
AOKI, K. & LENNERFORS, T. T. 2013. Whither Japanese Keiretsu?
KETELS, C. H. M. 2006. Michael Porter’s Competitiveness Framework
SLEDGE, S. 2005. DOES PORTER'S DIAMOND IN THE GLOBAL AUTOMOTIVE INDUSTRY?

framework: Japan
Based on the group work, it is clear that Porter’s (1990) diamond framework is a dynamic system.
This presentation has its own limitations, all the information provided are based on the materials and don’t present more in-depth
analysis of the chosen company in regards of the contributors to the successful international developments.
For the further studies, might be helpful to use the double diamond framework as proposed by Rugman, Oh and Lim (2012).
Carlos Ghosn (became the Japanese company’s COO) launched
the Nissan Revival Plan, the main aim of which was to reduce
costs by 20% over three years. In a press conference he clearly
stated that Nissan’s keiretsu system had not functioned well.
However, keiretsu appeared to be drifting steadily toward the
Western model. The new keiretsu provide a useful template to
enrich the relationships with suppliers for long-term benefit.
43Fig. 25
References:
AOKI, K. & LENNERFORS, T. T. 2013.Whither Japanese Keiretsu?
KETELS, C. H. M. 2006.Michael Porter’s Competitiveness Framework
SLEDGE, S. 2005.DOES PORTER'S DIAMOND IN THE GLOBAL AUTOMOTIVE INDUSTRY?
RUGMAN, A., OH,C. & LIM, D. 2012.The regional and global competitiveness of multinational firms.

framework: Japan
References:
Fig. 26 https://geert-hofstede.com/japan.html
National culture
•A high score (Masculine) on this dimension indicates that the society will be driven by competition, achievement and
success, with success being defined by the winner / best in field – a value system that starts in school and continues
throughout organizational life.
At 95, Japan is one of the most Masculine societies in the world.
•At 92 Japan is one of the most uncertainty avoiding countries on earth. This is often attributed to the fact that Japan is
constantly threatened by natural disasters from earthquakes, tsunamis (this is a Japanese word used internationally),
typhoons to volcano eruptions.
•At 88 Japan scores as one of the most Long Term Orientation oriented societies. Japanese see their life as a very short
moment in a long history of mankind. In corporate Japan, you see long term orientation in the constantly high rate of
investment in R&D.
Japan society anything they do they need maximum predictability. In
corporate a lot of time and efforts is put into feasibility studies and all
the risk factors. This high need for Uncertainty Avoidance is one of the
reasons why changes are so difficult to realize in Japan.
On the other side, expression of Masculinity is the drive for excellence
and perfection in their material production and in material services and
presentation in every aspect of life.
Taking into consideration the globalization of the industries, Japan
culture and the Japan Government Initiatives and Incentives. Japan will
play a global leadership role in the evolution of manufacturing and
industrial innovation.
44Fig. 26

Opportunitiesand threats
What are the opportunities and what are
the threats in the automotive industry?
45

Opportunitiesand threats
References:
46Fig. 27

Key driversof change
References:
Fig. 28 KPMG Global automotive Industry Report 2017
47
The ‘connected’ car
Considering automated cars as one of the main trends in the
next generation of cars, this will lead to drastic changes in
Automobile Industry.
The political change
Insecure political environment at the global level may affect
heavily the automotive industry e.g. At January 23 President
Trump signed an executive order to withdraw US from TPP Free
Trade Agreement. BREXIT has also had tremendous effect in
this industry (Renault has listed in its business strategy BREXIT
as a threat).
Fig. 28

References
48
AOKI, K. & LENNERFORS, T. T. 2013. Whither Japanese Keiretsu? The Transformation of Vertical Keiretsu in Toyota, Nissan
and Honda 1991-2011. Asia Pacific Business Review, 19, 70-84.
DAVIES, H. & ELLIS, P. 2000. PORTER'S COMPETITIVE ADVANTAGE OF NATIONS: TIME FOR THE FINAL JUDGEMENT? Journal
of Management Studies, 37, 1189-1213.
GUERZONI, M. 2014, Product Variety in Automotive Industry: Understanding Niche Markets in America, Springer, New York,
London
HOLROYD, C. 2008. Reinventing Japan Inc.: Twenty-First Century Innovation Strategies in Japan. Prometheus, 26, 21-38.
JOHNSON, G. Scholes, K. Whittington, R., 2008, Exploring Corporate Strategy 8th edition, Prentice Hall
KETELS, C. H. M. 2006. Michael Porter’s Competitiveness Framework—Recent Learnings and New Research Priorities.
Journal of Industry, Competition & Trade, 6, 115-136.
KOTLER, P. 2009, Marketing management, European edn, Pearson Prentice Hall, Harlow.
NIEUWENHUIS , P., Wells P, ed, 2015, The Global Automotive Industry, Cardiff University, UK Wiley, UK
PORTER, MICHAEL E. "Can Japan Compete? Revisited." Porter Prize Conference, Hitotsubashi University. Graduate School of
International Corporate Strategy, Tokyo, Japan, December 5, 2013
RUGMAN, A., OH, C. & LIM, D. 2012. The regional and global competitiveness of multinational firms. Journal of the Academy
of Marketing Science, 40, 218-235.
SLEDGE, S. 2005. DOES PORTER'S DIAMOND IN THE GLOBAL AUTOMOTIVE INDUSTRY? Advances in Competitiveness
Research, 13, 22-32.
TOMINO, T., PARK, Y., HONG, P. & ROH, J. J. 2009. Market flexible customizing system (MFCS) of Japanese vehicle
manufacturers: An analysis of Toyota, Nissan and Mitsubishi. International Journal of Production Economics, 118, 375-386.
http://www.economist.com/node/14299720 (accessed: 23april2017, 17:10)
https://hbr.org/2013/09/the-new-improved-keiretsu (accessed: 23april2017, 17:30)

References
49
http://japan.kantei.go.jp/97_abe/Documents/index.html accessed: 26april 2017, 2:22PM)
http://reports.weforum.org/global-competitiveness-report-2015-2016/country-highlights/
https://geert-hofstede.com/japan.html
www.acma.in
https://www.bloomberg.com/news/articles/2017-04-10/tesla-passes-gm-as-musk-s-carmaker-becomes-america-s-top-
valued
https://www.slideshare.net/yash902007/segmentation-of-car (partially adapted by the group
https://http://www.businessinsider.com/car-companies-of-the-world-2015-2
https://www.forbes.com/pictures/mkk45ekfi/1-toyotacorolla-201112/#350d0d734e16
J.D. Power, 2017 Report
J.D. Power, 2016 Report
http://www.reliabilityindex.com, 2017
European Commission’s Mobility and Transport Report, 2016
Ford Automotive Survey 2016
www.autobytel.com/car-buying-guides/../10-best-mpg-cars-for-2016-130642/
Car-brand-perception-survey, Consumer Report 2014
http://www.bmiresearch.com/blog/the-challenges-facing-new-entrants-in-the-premium-auto-sector
http://www.moneycontrol.com/news/european-markets/news/business/markets-business/-1757179.html [ 27042017
14:09 ]
http://marketrealist.com/2015/02/suppliers-power-increasing-automobile-industry/
https://www.strategyand.pwc.com/trend/2017-automotive-industry-trends
https://strategiccfo.com/buyer-bargaining-power-one-of-porters-five-forces/
https://www.strategyand.pwc.com/trends/2015-auto-trends] [27042017 14:40]

Questions&
Answers
50
Thank you for your attention!

Global automobile manufacturing industry 2016-2017. Key drivers of change

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Global automobile manufacturing industry 2016-2017. Key drivers of change

Similar to Global automobile manufacturing industry 2016-2017. Key drivers of change (19)

Recently uploaded

Recently uploaded (20)

Global automobile manufacturing industry 2016-2017. Key drivers of change