Aacsb Case Study – Global Automobile Industry
AACSB CASE REPORT
GLOBAL AUTOMOBILE INDUSTRY
INTRODUCTION
In this case we analyze a clearly consolidated industry, whose main players (the big three), have lost their importance. Actually, since they were used to be the kings of the US market and didn’t have any competitor that forced them to innovate, they have lost competitiveness during the years. In the 1990s, when Japanese and European brands entered the US market, they didn’t need a long time to take a big share of that market due to their resources and above all, their capabilities. It is very interesting how in the global market the Japanese cars are reliable, have a better quality and are the most efficient in their manufacture. This is obviously due to their capabilities, and because of their continuous investments and developments in their processes and technology. And they continued, being the first in launching a hybrid model, which is now one of their main income sources.
It’s surprising that two of the big three, after years and years of profits, had to ask for the federal aid to survive the 2007 crisis and even so, were acquired by foreign companies due to bankruptcy.
This “industry of industries” with the US as the bigger market and Europe as the second, was very wealthy back in the 60s-70s, but this cannot be always be so, in the 1990s the cost of oil rose, so people started worrying about fuel efficiency. Later on, in the first decade of the 21st century, some trend started to change the competitive environment, the big three lost their “superpower”, China started to massively grow as a market and producer (along with other countries like Brazil, India, etc.), creating a shift in the patterns of global demands, and the concern of the pollution and fuel consumption that derives in desire for new energy sources (batteries, electric cars, and hybrids).
Also when the market is “invaded” by foreign competition the comparative quality begin to be obvious, and as we see in the text, quality seems to be an important factor that explains the market share change in the industry.
FIVE FORCES ANALYSIS
THREAT OF NEW ENTRANTS
In my opinion, this force is weak. First of all, the economies of scales needed to achieve profitability are huge, along with the uncertainly of the demand, requires such volume of investment that only few people would be able to do it. But even for that people would be a huge risk. Moreover, a lot of brands have loyal customers, and obtain the awareness to fight that would require a big investment. There is also a lot of innovation in the industry, which requires a big R&D department to be competitive. Also, it is very difficult to achieve the capabilities to obtain a good quality car without incurring in high costs (like Toyota).