THE GLOBAL AUTO

INDUSTRY
CASE REPORT
GROUP 2
SITUATION PROBLEM DECISION POTENTIAL
ANALYSIS ANALYSIS ANALYSIS PROBLEM
ANALYSIS
 SITUATION ANALYSIS

The early development of the car industry was in America. Three manucturers were named The
Big Three: Ford, the master of mass production, General Motors, with a differentiated range of
models, and Chrysler who manufactures Minivans.

In 1960s, these three dominated the Unites States market having 90% sales and became the
world's largest.

In 1970s, the OPEC oil price hike opened an opportunity for the foreigners, and fuel-efficient cars
were introduced to the the market. Toyota, specially, became a threat to the big three with its lean
production, leading the American car makers into deep trouble.
The Big Three, now most oftenly called The Detroit Three, rapidly lost its grip on its market share.
But was saved by the robust sales of their light trucks, most specially their SUVs. But the foreign
SUV models and the rapid rise of oil prices brought an end to the two-decade boom sales of
SUVs, removing the main strength of the American manufacturers.
“The American manufacturers decided to imitate Toyota's strategy, but Toyota
were able to become the world's largest automobile manufacturer. Then an
economic recession hit the industry that lead the people to put off their
purchases on big-ticket items. This affected the industry hard as people waited
for the crisis to be resolved before returning to their purchases.

With this situation, the companies are trying to revitalize and continue to
strengthen their models into something that could change this. They are trying
to move towards a build to-order model, which would serve niche segments
efficiently.

Leading car manufacturers are concentrating on product development and

leveraging common platforms to launch new models. New business models that
cut costs and improve customer responsiveness are also emerging.
 PROBLEM ANALYSIS
Oil price hike surged to record high, from $20 a barrel in 2001 to $150 a barrel in 2008.

Economic Recession of 2008 hit the industry.

• Financial crisis that leads to credit squeeze, which in turn affected the purchases
on automobile.
• Rapidly rising losses due to fall on demand while fixed cost remained at high
level.

National and Local Government demands for lower emissions of

carbon dioxide, carbon monoxide and nitrogen oxide, which can add
significantly production
 DECISION ANALYSIS
To address the company's problem, the following ACA's can be done;

ACA 1) Invest more resources in alternative energy products such as

environment friendly cars.
Advantages: less usage of oil
Disadvantages: additional cost will incur

ACA 2) Product development that give the demands of the lower segment
customer.
Advantage: potential source of income.
Disadvantage: stiff competition

ACA 3) Setting of high sales goals.

Advantage: High return on sales
Disadvantage: Pressure on employees to achieve their sales
 POTENTIAL PROBLEM ANALYSIS
It is recommended that an investment for more resources in alternative energy products such
as environment friendly cars should be done followed by the product development that give the
demands of the lower segment customer and setting of high sales goals. The first alternative course of
action which is investing for environment friendly car can provide solution for the problem of high oil
price and the demand of National and Local Government for lower emissions of carbon dioxide.
Environment friendly cars are much cleaner and require less fuel to run which means it does
not only conserve fuel but also produce less CO2 emissions. On the other hand, with regards to the
additional costs in investing for environment friendly car, it's true that the first exposure in investing
involves excessive fees but that amount can be offset with the benefits that the company will get in
return. The second alternative course of action which is the product development that gives the
demands to the lower segment customer can provide solution for the economic recession of 2008.
 One of the most lucrative ways to improve the business is to attract the
competitor’s customers to the business. Consumers will switch brands and
businesses if they can see real value, so we need to give them a pretty good
reason to choose our business over the competitors. One way is to create
customer segmentation; it can provide answer to the demands of the lower
segment of customers. Another way is to know the competition.
Find out who your competitors are, what they are offering, and what their
strengths and weaknesses are. This will identify the areas you need to compete in,
and give you a platform for differentiating yourself. This will answer the
disadvantage of stiff competition in the market for product development. The third
alternative which is to set of high sales can give the company assurance that there
will be a high return on sales for a potential recovery in their market share. But
there will be a huge pressure on the part of the employees in achieving the set
goal. To lessen the pressure, the company should set goals that are measurable
and realistic considering the current state of the company.
THE
END