Marketing Assignment Report Analysis: UK CAR INDUSTRY

Marketing Assignment Report Analysis Overview:

Introduction

UK car industry is the Europe’s most dynamic and diverse automotive industry. The automotive car industry is divided into parts, the first part is the manufacturing of vehicles and its components and the second part is into the retail, distributing and the aftermarket services. Over 40 companies are into manufacturing of cars in UK. The UK companies are the third largest automotive market in whole of Europe with 2 million cars being registered in 2011, which is alone 14.3% of the registrations of European vehicles. UK automotive industry accounts for 1.8% of the world wide vehicle output and 7% of the Europe.  The UK car industry combines the legacy, agility and diversity, which places the UK industry in excellent shape to face the challenges and to bear the pressures of change in the 21^stcentury.  The major challenges UK car industry face is to align its product, its technology and business performance to deliver the value to the customers worldwide. UK car industry also aims to secure the environmental benefits while generating the competitive advantage. Another challenge before the UK car industry is by the South East Asian manufacturers, who plan to increase their market share, dramatically, however with innovation, efficiency and value-added manufacturing, the car industry is well equipped to face such challenges (BIS 2012).

Changes in UK CAR INDUSTRY in last five years

The productivity and the performance of the UK car industry has increased in the last five years to a large degree, until recently, the focus of the manufacturers was on the performance, looks of the cars, however the focus has gradually shifted to:

1. Economical Vehicles
2. Co2 emission from the cars
3. Eco friendly technology used in manufacturing of the car

The focus has been shifted to the economical vehicles due to dwindling supplies of the oil, and the soaring prices of the oil in UK. Secondly, the Co2 emissions from the cars are being given a check since global warming pose a serious threat to the environment, thus the Co2 emissions in the new cars manufactured, have been cut down by 20%. Thus, the new and innovative technology is being used in the manufacturing of the cars (TiroAssosiates 2010). It is expected that in the next 20 years from now, the manufacturers are set to see an investment of about 150 billion Euros, to produce ultra low carbon emission cars.

The new cars being designed are electric cars and the hydrogen fuelled cars. In June, 2011, Toyota installed the first solar panel on its vehicle. This was a major development in car technology and economic progress of the UK car industry. In the month of August, MINI made its two millionth mini at the Oxford facility, which highlighted the success and popularity of this brand, also Jaguar took 300 graduate students as trainees for its training programme, Thus giving UK, positive signals about the future of English automotive jobs, and in the year 2012, more innovation and developments in the car industry are expected to come.

The world economy was heading to global recession in 2007, which led to collapse of the financial system, fuelled by cheap credit and callous rumors, which decreased the demand for cars across the globe in late 2008 and early 2009. The bailouts and the emergency loans were provided by the government to the large manufacturers across the country (UniversityofBuckingham n.d.). The scenario of the UK industry was changed and which led to closure of many of the plants across UK, for e.g. the British owned volume car manufacturer MG Rover was nearly ruined by this. The decline in the sales was not due to ephemeral economic misfortune, but was a part of long term trend that has been observed and very well discussed. UK industry lost its prevalent position in the early 1950s and thus the trend has continued since then, and the situation of MG Rover in 2006 had further aggravated this problem. The reasons for decline were reduction in the trade barriers, and growth in competitive South Asian markets like India and China which had led to drastic changes in the manufacturing footprints. Also, as the supply of future looked uncertain for e.g. the fuel, and the ever increasing pressure to reduce the harmful transmission from the cars, thus the future of UK car industry was not certain. The sole producer MG Rover, sales can be shown in the graph below

            (Source: Bachelor Thesis 2005)

  However despite the factors affecting the UK car industry, it has changed itself in the last decade from a sector which is facing trouble with the labors and poor reputation to the one, which is fully competitive.

Macro Trends Affecting the UK CAR INDUSTRY

In the period of 2005-2012, there were many changes in the UK Car industry like mergers, demergers and bankruptcy of the suppliers and manufacturers. There were mainly three macro factors that affected the UK car Industry, that were regionalization, saturation and fragmentation. Due to increasing new global demand of passenger cars, the global production rose by a CAGR of 2.44% and the figure below shows the compound annual growth for the global passenger cars and commercial vehicle production, and the vehicles in operation.

           Table 1: Compound annual growth for global passenger cars and commercial vehicle production and vehicles in operation

 Saturation and Overcapacity

The UK car industry suffered from overcapacity and the actual reason for overcapacity was asymmetry, because it was easier to add to the capacity than reducing it. Before the economic crisis more and more plants were opened with the help of Government, thus, when demand dropped, it quickly became a political issue and as a result there was recurrent or permanent asymmetry in the capacity adjustment. It resulted in the problem that the manufacturers in order to keep the capacity utilization high started producing into the growing inventories of the unsold cars. Thus, the problem spread in whole of Europe and the solution adopted by many of the manufacturers was to link the demand with the production.

Fragmentation of Markets

There was a gradual increase in the model range, which led to the shortening of the product life cycle. With increase in the model range and reduction in the life cycles the economics of scale could have been achieved. Thus, the market was fragmented into two manufacturers, one was those manufacturers that were able to influence their brand portfolio and achieve economies of scale by distribution of platforms across models and brands and second were low volume premium end of the market, where brand strength and leadership according to the performance meant that manufacturers could command a high quality for their products. So, in between these two workable spaces, the pressure on manufacturers started to build up.

Regionalization

With the reduction in trade barriers and more porous borders, there were several diverse shifts in the UK car industry. As, the demand in the established regions was stagnating, thus search for new markets had begun, which led to spreading of the manufacturing bases in and around emerging markets.

The other factors affecting the UK car industry are:-

Political Factors: The political factors are the environmental legislation explorations, UK car market affected by investigations and high concentrations of market ownership.

Economic Factors: The economic factors affecting the UK car industry are overcapacity, industry at the whim of business cycle, only few independent car makers and finally difficulty in sustaining competitive ads.

Social Factors: The social factors affecting were the erosion of brand extras, market movement from petrol to diesel and finally manufacturing to a consumer dedicated market.

Technological Factors: The technological factors affecting were the discoveries spurred by government legislation, rising costs of the developments and developing the new models.

The other competitive factors affecting the UK car market are new technological developments, alliances to further market knowledge, sharing the design and technological developments, brands and joint ventures and the international boundaries being eroded.

Legal factors:  The legal factors affecting are the rules that can influence a firm’s decision to how the business is conducted by the firm in UK according to the laws of the UK.

Political factors affecting the UK car industry

The political factors affecting the UK car industry was for e.g. the decision of the government to investigate the UK car market, when MG Rover sales had dropped and also when it was almost doomed. And other rules passed by the government those impacts the UK car industry in anyway.

 Technological factors affecting the UK car industry

The new technology and modern practices have changed the shop floor atmosphere and product technology uses light weight materials, cutting edge design investigation and visualization tools and widespread usage of integrated electronic systems to expand control to most parts of the car. Also, UK car manufacturers are heavily using the technology to embrace the CO2 technology. Also, a lot of focus is put on developing the hydrogen propelled cars.  A new team has been formulated called NAIGT (New Automotive Innovation Growth Team) with a twenty year vision for the automotive industry, which focuses on creating a transformed business environment, formulating technology road maps for  CO2 emission free vehicles and hydrogen propelled cars, it also focuses on the research and development agenda of the UK car industry (BIS 2012).

Social factors affecting the UK car industry

The various socio-cultural factors affecting the consumer behavior are the age distribution like most of the consumers are around the age 45 and the young population is constantly decreasing thus industry could increase its revenues by 5% by focusing on the growing older populations, family plans, consumer behavior or the spending culture and budget for e.g. understanding what the consumer wants or what are his/her needs the information like 80% of the vehicle sales are to corporate bodies and 20% of the market is retail, and the overall business consumers are of greater importance to the manufacturers , next comes the social expectations which helps in perceiving the demands of the society and thus the manufacturer can benefit from this knowledge.

Economic factors affecting the UK car industry

Economic factors that affect the UK car industry are the overcapacity and saturation in the markets of UK, and how it can be overcome, also finding the new markets for the UK car manufacturers, the economic condition prevailing in the country, the excise duty on export of the goods to the new markets, Also knowing the competitors in the market, or if there is monopoly the price san be set by the individual manufacturer else, the price is decided according to the competition in the market, the prices of the raw materials and the essential commodities like fuel, diesel.

Legal Factors affecting the UK car industry

The European Commission is the global legislature, which affects the automotive industry in UK. The commission passes the regulations that are progressive and feasible. The recent developments are including the directives of total vehicle recycling and improvements in the pedestrian impact act (CarDesignOnline n.d.).

Global level Automotive Industry

The downturn in the global automotive industry was a part of global economic slowdown. It affected whole of Europe, America, and Asian automobile manufacturing industry. The automotive industry was weakened by the soaring prices of fuels, which had discouraged the purchasing of SUVs and pickup trucks, however the General Motors, Ford and Chrysler were encouraged, and made them the primary focus of the consumers. The present scenario is such that Indian, Chinese and other Asian markets have introduced marketing strategies to attract even the most unenthusiastic consumers in the market. The North American consumers have turned to cheaper and more fuel efficient import from Japan and Europe. American manufacturers have also increase their capability to manufacture by introducing newer technologies.UK markets are also experiencing the best sales since 2004.

Summary

The UK Automotive industry is recovering from the slowdown. Newer technologies have been introduced and new innovative technology is being used in manufacturing the cars, for e.g. CO2 emission has been cut down and hydrogen powered vehicles have been introduced. The economic factors like overcapacity and saturation are being kept in control, also, as the consumer population of UK is around the age of 45, so that has been kept in mind while manufacturing the vehicles.  Also, most of the consumers are business oriented people.  The annual turnover for the UK car industry at present is 14 billion Euros, which also creates a number of jobs opportunities for various people. Toyota exports about 85% of UK production and Jaguar about 80% of the products. Also, the UK has moved to second largest premium car industry in the world after Germany (WeareSpartacus 2012).

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