A report on Automobile industry of Australia

1. Executive Summary:
The main ideaof thisreportis to understandthe challengescompanyface whentheyswitchfromone
industrytoanotherinB2B market. This will coverthe analysisof the industryandthe targetsegment.
Thiswill alsocoverthe size of the industry,value factorsinb2b environment,competitor’s analysis,
Buyers& sellerrelationshipand toidentifythe majorbuyersof the targetsegmentof the industry.
1. Introduction:
Orora manufacturesarchitectural glass forManyattaEmbassyBusinessParks (Real Estate Company)
whichisnowlookingtodiversifyitsbusinesstodevelop automotive glassproducts forFordMotors.
2. About Industry
Industryisthe productionof goodsor relatedserviceswithinaneconomy.The industrieshereunder
considerationare:
 Glassand Glass ProductManufacturingindustry
 Automobileindustry
2.1 Presentindustry characteristics:
Australia'sGlassandGlass ProductManufacturingindustry have twokeysegments: the glass-container
segmentandthe flat-glasssegment.
The glasscontainersegmentisdominatedby twomajorfirms,Owens-IllinoisAustraliaandOrora
Limited(formerlyAmcorGlass),whichmanufacturesbottlesandjarsforpackagingbeveragesandfood
products.The flat-glasssegmentincludesViridian(CSRLimited),whichisthe onlymanufacturerof float
glass(i.e.high-qualitysheetglass).The industryincludesmanysmall tomediumfirmsproducinga
varietyof fabricatedglassproducts.The industryhas an estimated730enterprisesemploying9,025
people in2015-16,
IndustryReport- IndustryKey players:
The industryhasa moderate levelof marketshare,withthe fourlargestplayerscontributingabout
42.5% of industryrevenue in2015-16, downfrom about55% inthe late 2000s. These include O-I
Australia(glasscontainers),Viridian(floatglassandprocessing),Orora(glasscontainers)andSMR
Automotive (auto-glassprocessing).O-IandViridianbothhave accesstoglobal financialresources,
marketingresources,andadvancedtechnologyanddevelopment. The degree of industryconcentration
has declinedoverthe pastfive years,largelydue tothe reducedimportance of Viridian,whichhaslost

2. much of its share of the float-glassmarkettoimports.Much of thismarketshare has beencapturedby
the smallerplayersandentrantssuchas JELD-WEN.
Glassand Glass ProductManufacturingMarket ResearchReport|ANZSICC2010 | Feb2016
2.2 Characteristics of Automobile Industry:
The automotive industryhasanational workforce of more than400,000 people employeddirectlyand
indirectly - more than1 millionnewvehicleswere soldinAustralialastyear,andmore than100,000
motorbikes.
 The industryemploysaround400,000 people directlyandindirectly.
 Annual turnoverwithinthe industryexceeds$160 billionand isa source of significanttaxation
revenue forgovernment.
 In 2010, the motorcycle industrygeneratedapproximately$3.6billioninrevenueinAustralia.
http://www.unescap.org/sites/default/files/AWP%20No.%2037.pdf
3. Industry Analysis:
The Australianautomotive industryplaysapivotal role inoureconomy,driving wide scale industrial
activity,boostinginvestment,innovationandbolsteringeconomicgrowth.
3.1 Size of the Industry:
Global salesof passengercarsare forecastto hit73.9 millionvehiclesin2015. AlongwithChina,the
Australiaiscountedamongthe largestautomobilemarketsworldwide,bothintermsof productionand
sales. About7.7 million passengercarswere soldto the customersin2014, and around 4.25 millioncars
were producedhere inthe same year.
3.2 Various factors in B2B environment:
Stakeholder’sfactors:
 Stakeholdernetworks
 Long / shortterm relationship
 Unsupportedorco-operative relationship
 Formalisedorcasual purchasingprocess
 Legal,Codesof Practice and otheragreements

3.  Social and cultural values
Organizational Factors:
 Corporate valuesandobjectives:
 Resourcesandcosts
 Establishedprocedures
Individual Factors:
 Interpersonal effects
 Relative statusof individuals
 Personal rewardsandincentives

4. 3.2.1 PESTEL
Political factors:
Political factorsincludeareassuchas tax policy,labourlaw,environmental law,trade restrictions,
tariffs,andpolitical stability.Governmentshave greatinfluence onthe health,education,and
infrastructure of a nation.
Environmental factors:
These include weather,climate,andclimate change,whichmayespeciallyaffectindustriessuchas
tourism,farming,andinsurance.
Social factors:

5. These include the cultural aspectsandinclude healthconsciousness,populationgrowthrate,age
distribution,careerattitudesandemphasisonsafety.
Technological factors:
These include ecological andenvironmentalaspects,suchasR&D activity,automation,technology
incentivesandthe rate of technological change.
Economicfactors:
Change inthe economy can affectthe supplyordemandfor a company'sproductsand services.
Sometimes ithasa positive impact,like the country’sgrossdomesticproduct(GDP) increasesmore than
expected.Othertimes,economicforcescanhurta business,like consumerconfidence drops,and
potential customer’s startsspendinglessandsave more.
Legal Factors:
These include discriminationlaw,consumerlaw,antitrust law,employmentlaw,andhealthandsafety
law.These factorscan affecthowa companyoperates,itscosts,andthe demandforits products.
http://www.fcai.com.au/library/publication/fcai6049_full_version_final_(2).pdf
3.2.2 Potor's five forces
The Porter's Five Forcestool isa simple butpowerfultool forunderstandingwhere powerliesina
businesssituation.Thisisuseful,becauseithelpsyouunderstandboththe strengthof yourcurrent
competitiveposition,andthe strengthof apositionyou're consideringmovinginto.
https://www.diva-portal.org/smash/get/diva2:627146/FULLTEXT01.pdf
Five Forces Analysisassumesthatthere are five importantforcesthatdetermine competitivepowerin
a businesssituation.These are:
SupplierPower: Thisisdrivenbythe numberof suppliersof eachkeyinput,the uniquenessof their
productor service,theirstrengthandcontrol over the comapny,the costof switching fromone to
another,andso on.
BuyerPower:Thisdependsupon the numberof buyers,the importance of eachindividual buyerto the
business,the costtothemof switchingfrom the company’s productsandservicestothose of someone
else,andsoon.
Competitive Rivalry: Thisdependsuponthe numberandcapabilityof yourcompetitors. If the
competitorsofferthe productatthe same price,thenthe rivalryincreases.

6. Threat of Substitution:Thisisthe abilityof your B2Bcustomerto finda different productasa substitute
If substitutioniseasyand easilyavailable,then thiswill weakenyourpower.
Threat of NewEntry: There isalwaysa reasonof worryfor all the companiesthatnew firmsshouldnot
entertheirindustry;thiscanimpactthe businessplansof alreadyexistingcompanies.
3.3 Competitionanalysis:
The competitive environmentfacingAustralianvehiclemanufacturershaschangedsubstantiallyinthe
periodsince the completionof the previousreview of the industry(December2002). Several factors
standout as havingcontributedtoa significantshift inthe competitive balance betweenimportedand
locallymanufacturedvehiclesandthe competitivenessof Australianautomotive exports:
 The appreciationof the Australiandollaragainstotherkeycurrencies,fuelledbystrong
international demandforAustralianresourcesandrisingtermsof trade;
 Changingmarketsegmentation,reflectingthe impactof risingfuel pricesandotherinfluences
on consumerpreferences;and

7.  The impact of global restructuringandcommercial pressuresaffectinginternational automotive
producersandevolvingglobal approachestosupplychainmanagement.
The impact of these factorshas decline the marketshare of locallymade vehicles.Locally-builtvehicles
now justaccount for around20 per centof lightvehicle salesinAustralia,comparedwithamarketshare
of around32 percent in2002 and 45 per cent tenyears ago. The Australianautomotive industryis also
facinga major challenge to implement the developmentandmanufacture of more environmentally
friendlyvehicleswhichproduce lowergreenhouse gasemissions.
Major competitorsof Orara:
 Owens-Illinois
 CSR
Both these companiesare wellestablishedinthe marketandthereforeOrarahave to adoptthe right
marketingstrategiestoovercome itscompetitors.
https://businesssa.com/assets/policy%20documents/150217_BSA%20Submission%20senate%20inquiry
%20automotive%20industry%20future.pdf
4. Market SegmentationApproaches:
Market segmentationforautomobilesintoday’stimes,the automobilesectorisrobustwithgrowthand
more and more playersare enteringthe automobile industry.
4.1 Macro Segmentation:
Macro-segmentationfocusonthe characteristicsof the buyingorganizationthusdividingthe marketby:
Company size: Thisisone of the mostpractical andeasilyidentifiable criteriawhichcangive a good
roughindicatorof the potential businessforacompany.
Geographiclocation:Ittellsacompanya lotaboutculture and communicationrequirements.
Purchasingsituation:Asaresultof increasedcompetitionandglobalization companies findingafocusin
a small numberof markets,getto knowthe marketwell andestablishlong-termrelationshipwith
business.
SupplyChainPosition:A businessmodel affectswhere andhow theybuy.If he pursuesacost leadership
strategy,thenthe companyismore likelytobe committedtohigh-volume manufacturing,thus
requiringhigh-volume purchasing.
4.2 Micro Segmentation

8. Micro-segmentationfocusesonfactorsthatmatterin the dailybusiness.
 Buyingdecisioncriteria: The Companymustdivide the marketbasedonsupplierprofilesthat
appearto be preferredbydecision-makers,e.g.highquality,less-promptdelivery,low price etc.
 Purchasingstrategy:There are companieswhocontactfamiliarsuppliersandplace the orderwith
the firstsupplierthat fulfills the buyingcriteria. Someorganizations consideralargernumberof
familiarandunfamiliarsuppliers, fix the bids,examine all proposalsandplace the orderwiththe
bestoffer.
 Structure of the decision-makingunitcanbe one of the mosteffectivecriteria. If the decision-
makingprocess isknown,itcan make a difference betweenwinningand losingacontract.
 Perceivedimportance of the producttothe business
 Attitudestowardsthe supplier:Personal characteristicsof buyers(age,education,jobtitle and
decisionstyle) playamajorrole informingthe customerspurchasingattitude aswhole.
http://www.unescap.org/sites/default/files/AWP%20No.%2037.pdf
4.3 Identificationoftarget markets
There are three stepstofollow while identifyingthe targetmarket:
 Identifywhyabusinesswouldwanttobuy the product/service
 Segmentthe overall market
 Researchthe market
There are fourbasictypesof marketopportunities:MarketPenetration,MarketDevelopment,Product
Development,andDiversification.

9. Market Penetrationstrategies include:more aggressive marketing,increasingservice toimprove
renewal rates,orattractingcompetitorcustomersdirectly.
Market Developmentis anefforttoincrease salesbysellingcurrentproductsintonew markets. The
companies canadvertise toreachnewtargetcustomerswithinageographicregion,orlook for
international marketsforexpansion.
ProductDevelopmentreferstoofferingnew orimprovedproductstopresentmarkets.
Diversificationmeansopeningcompletelynew linesof business withnew productsinnew markets.
Many organizationsdiversifytheirproductmix tomitigate risksrelatedtoeconomicvariables.
http://edwardlowe.org/
Future Growth:
It isquite feasibleforAustraliato create a leadpresence inrapidlyexpandingmarketsforelectric‘near
zero- emission’vehicles.
Automobileindustryexpertpredictsthatby2050 everysixthcarinthe worldwill be for Ausies.By2010
Australiawill take overGermanyinsales volumesandJapanby2012. The Australianautomobile
componentindustryisestimatedtotriple fromUSD63 billiontoUSD 190 billionwithinaspanof six
yearsby 2012. IndustryanalystspredictthisindustrytotouchUSD 13000 millionmarkby2010, a
cumulative growthof 9.5%annually. Itissaidthat for every $ 1 spent,the autosectorreturns $. 2.24 to
the Australian economy.
http://www.unescap.org/sites/default/files/AWP%20No.%2037.pdf
4.4 Strategiesadopted to enternew market:
There are a varietyof waysinwhichorganizationscanenter new markets:
 Exporting:
 Licensing
 Jointventures
 Ownership
The Orora Companyshouldfollowprice penetrationpolicytoenterthe auto industry.
Price penetrationpolicy: A marketingstrategyusedbyfirmsto attract the customersto a new product
or service.Penetrationpricingisthe wayof offeringalow price for a new productor service duringits
initial stage inordertoattract customersawayfromcompetitor.

10. The company can alsofollowprice skimmingpolicyaswell.It’suptothe companyto follow eitherof the
pricingpoliciesasbothof themhave theirownbenefits.
Price Skimming Policy:Price skimmingisaproduct pricingstrategywhere afirmchargesthe highest
initial price thatcustomerswill pay.Asthe demandof the firstcustomersissatisfied,the firm will lower
the price to attract anotherwhichismore price-sensitivesegment.
The company (Orora) hasto come witha product differentiationstrategy tomake its productdifferent
fromthe marketsothat the B2B clientgivesall the manufacturingorderstothem.
In the initial stage,theyhave togothroughthe marketingandadvertisingaswell astocreate a name in
the industry. Thiswill incurcostto the companybut inthe longrun thiswill be greatlyhelpful in
positioningtheirproduct.
http://www.inc.com/karl-and-bill/5-step-primer-to-entering-new-markets.html
4.5 ImplementationPlan:
The diversificationplan shouldcoveradue diligenceaboutthe automobile industry.Orora
shouldchecktheircompetitorreportshow theyare doingthe business andhow muchprofitable
it is. Once it isfoundgoodto enter,the prospective automobile firmsshouldbe contactedtoget
the partnershipinmanufacturingautomotive glassproductsforthem.
http://ectacenter.org/~pdfs/implementprocess/implementprocess-stagesandsteps.pdf
Anyimplementationplanincludesthesethree steps:
 Exploration: The Companyhasto explore the opportunitiestoenterthe new industryas
well asthe source of funds.
 Installation:If the companyisdiversifyingitsbusiness,thenthe new manufacturing
facilityhastobe setup.
 Implementation:Thisisthe laststage where the companygoes aheadwiththe decision.
5. Recommendations:
(a)The AustralianGovernmentshould consider:
•the removal of the five percenttariff onimportedpassengerandlightcommercial vehiclesasmany
automobile companieshave stoppedmanufacturingmotorvehiclesinAustralia
•the removal of the luxurycartax.

11. (b) The companyshouldnotleave theirpresentbusinesswhilediversifying theiroperations.
(c) The companyshouldgowithprice penetrationpolicyasitwill be verynew tothe automobile
industrywhichalreadyhasmajorkeyplayers.
(d) Orora has to considerall the aspectsbefore enteringintothe new industrybecauseinthiscase the
industrywhichtheyare enteringintoisanautomobile industrywhichisgoingthroughabadphase.
(e) The companyshouldwaitby2018 as the bigtwoautomobile playersare quittingthe business. The
clearpicture of the industrywill be visible once fordandGM are out of Australia.Theirexitwill
definitelyaffectthe industryadversely.
6. Conclusion
It’sbeena bad experience since18 monthsforthe Australianautoindustryandits50,000 workers.One
by one,the country’sautomakers are declaringthat,withoutimportprotection, itwill notbe profitable
and have to close. Fordisthe firstto go and will close itsoperationsbyend2016. General Motors will
shutdownits businessby2017. So the companyenteringintothe automobilesectorhasto be little bit
cautiousandshouldneverthinkof leavingtheirpresentbusinesskeeping onlyexpansion strategyin
mind.Orora shoulddiversifybutautomobile industrymaynotbe so profitable businessforthem. One of
the reasonsof exitingthe automobile industryisthe luxurytax imposedbythe Australiangovernment.
There ishuge importtariff whichismakingthe automobile businessless attractive.
On one side,where we cansee thatthe industryin expandingonthe global basis,inAustraliaitsactually
strugglingtokeepthe same marketshare.