Please read the draft bellow and respond the question in the end.
The United States' Automotive industry is one of the largest automotive markets in the world. It stands in the second place next to China for the largest producers of vehicles. Although, during the recession in 2008 and 2009 where the automotive industry sales had decreased drastically. It soon picked up with a steady pace and have reached 17.4 million units in 2015 when compared to 10.4 million units in 2009. The automotive industry contributes to 3 to 3.5 percent of the country's GDP employing more than 9 lakh employees.
The US automotive sector is thrived to produce innovative products to its consumers with large investments being made on Research and Developments which comes to around $18 billion per year. The US is considered as the future of the automotive industry due to its high skilled workforce, infrastructure and encouragement by the government through its incentive programs. This is a result that US exported close to 2.6 million vehicles in 2015 alone to 200 countries which valued for $65 billion.
In the present scenario, the automotive industry in the US is expected to have a huge boom. One of main reasons being the unemployment rate which has come down to less than 5%. The demand for vehicles have increased as people want updated vehicles for their commuting purpose. The demand for cars are increasing for sure but the customers requirements are a mix of different segments which the automotive industry would have to match with.
Next, discuss the Market Structure
History of the industry
The company selected is Volkswagen: The company has earned a good share in the US market competing with major players like Ford, GM and Daimler Chrysler. A brief study is presented here:
History of Industry:
The auto industry was crafted in Germany and France in late 1800's, American companies dominated the industry in the first half of the twentieth century. Given the American manufacturing tradition, it was also inevitable that cars would be produced in larger volume at lower prices than in Europe. The absence of tariff barriers between the states encouraged sales over a wide geographic area. Cheap raw materials and a chronic shortage of skilled labor early encouraged the mechanism of industrial processes in the United States. This in turn required the standardization of products and resulted in the volume production of such commodities as firearms, sewing machines, bicycles and many other items.
Major competitors and their market share
Major competitors and Market share:
General Motors 23%
Ford: 17%
Toyota:20%
Daimler Chrysler: 14%
Volkswagen: 15%
Honda: 9%
Hyundai motor America: 6%
Kia motors America: 5%
Market concentration ratio
Market Concentration ratio: Automotive Vehicles 87.3, which means the industry is controlled by top 4 to 5 players
New entry conditions
New Entry Conditions:
As their are only few top players, it is a oligopoly market which means competition is among these players. It is bit difficult to enter as it needs to brake barriers and images established by top players.
Merger and acquisition activity
Merger and Acquisition:
Mergers and acquisitions in the global automotive supplier sector are occurring at an unprecedented level in 2015, according to the Strategy& seventh annual "Consolidation in the Global Automotive Supply Industry" report. Based on data from the first six months of 2015, Strategy& anticipates that deal value will top US$48 billion for the full year, a 340 percent increase over 2014. What is particularly striking about the current trend is the rise in deal value. The figures indicate a slight decrease in the overall number of deals for the year, but a vast increase in the number of megadeals
Pricing schemes
Pricing Schemes:
The pricing is based on the competition in the market, so each firms evolves with competitive price and thrust on service factor.
Discuss some cultural issues that you may encounter in Detroit
To create a subsidiary in Detroit city as a CEO market research and analysis is necessary to know the customer type and cultural dynamism of the city. The culture is influenced by global factors mostly Greek immigrants having immense taste in art and music there are more of Hispanics, Belgians, French with most part of the areas covered with social centers like pubs and stadiums.
This shows massive cultural diversity but with issues like prohibition on big business set ups m, high infrastructural cost involved is always a threat for the city, infrastructural and commercial management has been an issue over the years, people are still not willing to spend highly through taxes on development. Thus while setting up a subsidiary ensuring sound infrastructural facilities should be helpful to derive from the market research.
Conduct a SWOT analysis of your industry with the data that you found:
SWOT ANALYSIS
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STRENGTHS
1. Second largest automobile manufacturer .
2. Best auto manufacturer offering credit services.
3. Supply chain is very good.
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WEAKNESS
1. Lack of diversification.
2. Small share market.
3. Various obligations.
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OPPORTUNITIES
1. Environment friendly company.
2. Well researched units in terms of technology.
3. Hybrid electric engines.
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THREATS
1. Rising raw material prices.
2. Low capital spending.
3. Rising competition from other players with better technologies.
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Discuss some human resources issues that you may encounter as a European company in Detroit.
The main HR issues which a European Manager can face in the subsidiary in Detroit are as below:
There can be a difference of culture and operational methods among the workforce of Europe and America.
Automobile sector is characterized as a sector having a high turnover ratio so the challenge to manager would be to control the turnover of the employees.
The manager has to make a comprehensive, step-by-step action plan to become an 'employer of choice."
There can be some resistance among the workforce regarding a foreigner being the head, so this problem needs to be overcome with the help of cooperation and collaboration, guiding wand controlling the employees effectively.
The manager needs to develop different leaders in the organization who can help the other members in attaining their targets and helping and guiding others. These leaders can be the source of communication with the manpower of the firm.
The company may have the over capacity and thus recruiting the right number of employees becomes critical as having greater number of employees will hamper the profit while having lesser employee can hamper the production.
The manager can face the issue of shill shortage so various training and development plans depending upon the both firm and employee's requirements are needed to be framed.
HR directors are expected to recruit, develop and train workers to be technically proficient in automotive processes and technologies. This may involve recruiting people with experience in a non-automotive manufacturing environment and providing targeted training to help them make the transition.
In USA, the HR managers are not directly involved in negotiating a collectively bargained wages-and-benefits package with labor unions thus these managers must look the possibility of increased unionization - and its ramifications -- at auto plants in traditionally non-union turf.
Select a structure for your firm. Discuss why you selected that structure.
Using the points above, prepare the final report with the following required sections:
Team based structure, I will prefer to use line and staff structure of the firm. Line authority will guide directly to subordinates. Whereas staff authority provides support to line managers as well as to the subordinates.
I have opted this structure due to my new entry into the market conditions.
So, All the supervisors will establish the direct work relationship with their fellow workers by span of control.
Where as HR manager as an authority will discuss the issue regarding payment to the workers or even supervisor.
So, Line and staff structure will be helpful in establishing the work relationship among workers and staff's members with management people.
QUESTION:
Conduct a well elaborate swot analysis, explaining the WHY of all the points presented (2 pages)