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Helen's report

Report topic:

Select a specific product/target market from within the broad areas identified below and:

  1. Discuss how the macroenvironmental variables have had an impact on this market making sure you show that you understand all the macroenvironmental variables that are likely to have an impact.
  2. Identify two different marketing mixes used by two different companies to target the market you have identified.

Use examples to support your discussion where appropriate.


Executive summary:

This Minor Assignment - Stream 1 is based on a business formulated report discussing the Australian Automotive Industry, and includes a general description of the industry, such as production details, major players, etc. This report will also attempt to identify and cover the microenvironmental and macroenvironmental forces affecting the industry and the likely consequences as a result of these forces. It is hoped that through this minor assignment and by investigating the automotive industry, a broad knowledge of the industry mentioned will be gained, an understanding of how the micro and macroenvironmental forces can and might affect the industry and thus enhance, improve and build my marketing skills. The aim of this assignment is also to provide an insight into how marketing can impact and influence us, in turn how we as the public community can influence others both now and in the future.

Contents

Executive Summary

1. Introduction

2. Industry Description

2.1. Sales

2.2. Production

2.3. Automotive Trade (Imports and Exports)

TABLE: 1 - Major Importers to Australia

TABLE: 2 - Major Exports of Australian Vehicles and Automotive components

2.4. Employment

2.5. Research and Development

3. Micro-macroenvironments

3.1. Microenvironment

3.1.1. Consumers/Customers

3.1.2. Suppliers

3.1.3. Competition

GRAPH: 1 - Major Players

3.2 Macroenvironment

3.2.1 Economic Pressures

3.2.2 Technological Changes

3.2.3 Demographic Forces

4. Conclusion

Bibliography



Motor vehicle industry

1. Introduction:

The Motor Vehicle Industry is a large and complex enterprise which not only consists of the manufacture and sales of passenger vehicles, but also the manufacture and sales of commercial vehicles, trucks, buses, planes, motor vehicle components, vehicle body manufacturing, automotive electrical/instrument manufacturing, engines and motor cycles. This vast industry produces, sells, imports and exports motor vehicles from passenger vehicles to vans, sports and luxury cars. It also comprises services ranging from repairs and safety tests to insurance, design, research and development. The major market segmentation includes private buyers, government fleet purchasers, business fleet purchasers and buyers of heavy industrial vehicles. This industry, however, is affected and influenced by many factors outside the control of the industry. These factors include the micro and macroenvironments.

2. Industry description:

2.1. Sales:

Currently the Australian automotive industry has grown significantly over the years, with a 12% increase in vehicle sales, totalling 807,669 units in 1998 compared to 85,000 units in 1997. Within this 12% there was an increase of 23% in commercial vehicles, 35% in wagons, and passenger vehicles increased 8% (10% of passenger vehicles was due to an increase in small cars, and 9% due to increase in the upper medium sector). This was significant as the passenger motor vehicle manufacturing segment represents 78% of Australia's key product segment, with the other 22% being represented by the freight bus manufacturing segment.

2.2. Production:

Production in the motor vehicle industry occurs nation-wide, with Victoria producing and manufacturing 47.3%, NSW 14.3%, Queensland 18.8%, SA 8.9% WA 9.8% and the Northern Territory producing 0.9%. However, the market size for the Australian motor vehicle manufacturing industry only consists of 80 organizations, of which less than 24% of people employed in the manufacturing sector produce automotive equipment.

2.3. Automotive trade (import and exports):

Imports of vehicles and components occur nationally, with major importers being Japan, Republic of Korea, Germany and the United Stated. In the year ending 1999, imports had risen 7.9% as a result of strong demand for imported vehicles (6% increase in the demand for imported vehicles domestically). However, there was only a 0.9% increase in production of motor vehicle and automotive parts locally. The Australian motor vehicle industry also exports motor vehicles and automotive components, some of the major exporters being New Zealand, Republic of Korea, the United States of America, the United Arab Emirates and South Africa.

TABLE 1: - Major Importers to Australia
Country Percentage
Japan 57.0 %
Republic of Korea 11.1 %
Germany 10.6 %
United States of America 6.0 %


TABLE 2: - Major Exports of Australian vehicles and automotive components
Country Percentage
United States of America 19.0 %
New Zealand 18.8 %
Republic of Korea 17.8 %
United Arab Emirates 17.8 %
South Africa 2.2 %

2.4. Employment:

The Australian Motor Vehicle Industry manufacturing segmentation employs around 55,000 people in total. Within the manufacturing market segment, approximately 20,000 people are employed by the motor vehicle manufacturing sector, 11,000 employed by the motor vehicle body manufacturing division, 10,000 by the automotive electrical and instrument manufacturing portion and the remaining estimated 4,000 employees are employed by the automotive component sector. Thousands more people are employed in car retailing, research and development, insurance, fuel and petrol segments, management and administration of both manufacturing and service motor vehicle organizations. The government also employs thousands of people in their government departments, which monitor and regulate motor vehicle laws, e.g. employees governing registration, drivers' licensing, industrial relations, etc.

2.5. Research and development:

The automotive industry also includes a research and development segment, which researches areas such as air pollution, gas emissions and road-worthiness of cars, and tries to develop solution to these problems. For example, Holden has researched and developed a prototype car called the Hybrid, which will reduce gas emissions, air pollution, fuel consumption and resources, by running on smaller amounts of petrol and more on electricity. The research and development segment also researches to design up-market cars, which excel in luxury, prestige, and market these to a niche sector. For example, Mitsubishi Technas and the aXcessAustralia Hybrid Concept car is designed and aimed to provide the world with an innovative vision of cars in the next century.

3. Micro-macroenvironments:

The microenvironment is defined as forces affecting and influencing the organization's growth, production, function and direction, which are close to and directly impact the organization. Some of these forces include consumers/customers, suppliers, competition and marketing firm channels. The macroenvironment refers to the forces which extend beyond the organization's direct interaction and are out of their control, but determine the long-term survival of that organization. These macroenvironmental forces include economic, legal, political, social, international, technological, education and demographic pressures.

3.1. Microenvironment:

3.1.1. Consumers/Customers:

Consumers/customers are the lifeblood of the industry as they directly affect it and determine if it is to succeed and grow. Without the customers purchasing and supporting the demand for products and services provided by the industry, there wouldn't be a market for the automotive industry's existence. With the goods and services tax to be introduced in July 2000, the expected drop in prices has led to customers postponing purchases of motor vehicles; thus there isn't the expected growth in the industry as hoped several years ago. The increase in fuel prices has also hampered the growth of the petroleum and fuel sector, as customers feel that they must seek cheaper alternatives to transport. Within the automotive industry, the car-retailing sector has implemented a strategy to increase sales, through heavy discounting on cars now instead of waiting till July 2000. This in turn has improved the industry's growth and reduced a large amount of impact on overall sales. Once the GST is introduced, customers will hopefully resume the purchasing of vehicles without the heavy discounting; thus the industry will continue to grow at a steady rate.

3.1.2. Suppliers:

Suppliers largely dominate the automotive industry, whether they provide raw goods to other sectors within the industry itself or are suppliers providing raw goods to the general public. The fuel and petroleum segment of the motor vehicle industry has recently increased fuel prices, which have directly affected the automotive industry as customers are reluctant to fully refill their engines, thus reducing the amount of fuel purchased. It has also affected the industry's image, as customers and sectors within the industry are not pleased and are expressing anger to some extent towards the increase. The GST (goods and services tax) to be introduced has affected the production plans of manufacturing organizations. This is due to the reduced demand for vehicles from the general public; therefore there is the need to produce vast quantities of body parts, components, engines or vehicles. Again this restriction to the quantity of vehicles and components manufacture will undoubtedly continue once the GST has taken effect.

3.1.3. Competition:

There are major competitors (accounting for 65.3% of manufacturing turnover) in the motor vehicle industry that manufacture, sell, export and import vehicles and components, and these include the Ford motor company of Australia, Toyota Motor Sales Australia Ltd, Mitsubishi Motor Australia Ltd and Holden Ltd. Mack Trucks Australia Pty Ltd is also another major player in the motor vehicle industry, which deals with the truck and buses sector, accounting for 34.7% of industry turnover. Over the past year, competition in the industry has increased due to the abolition of quotas on imports, thus allowing unlimited imports of vehicles into the country. In turn, this has put pressure on both organizations in the industry and the government to increase the standard/level of quality, efficiency and lower vehicle prices. Further pressure on competition has risen due to the fact that imports now account for 42% of sales made. Competitors must strive to improve the quality and technology of vehicles in the new century, as many competitors such as Holden and Toyota have now released a Hybrid model, which is cost-efficient, environmentally-friendly (reduces air pollution) and reserves resources, such as gas, petrol, etc. It is expected that competition will continue to rise as the GST will lower vehicle prices further, and more imports will allow customers more options when purchasing vehicles, thus the design, features and cost must be more appealing to the market than what other competitors are offering.

GRAPH 1:

graph 1

3.2. Macroenvironment:

3.2.1. Economic pressures:

There are many economic pressures which plague the motor vehicle industry which include inflation, the level of interest rates, the type of taxation, increase minimum wages, and level of international competitiveness. Currently the motor vehicle industry is seen as a mature industry where the domestic and world economic cycles are strongly influencing the growth and turnovers in the industry. As mentioned previously, the introduction to the goods and services tax (GST) has so far had a devastating effect on the industry as sale and turnover figures indicate that customers are postponing purchases, therefore creating difficulties for manufacturers and car retailing organizations. Another downside to the GST is that used/second-hand cars will incur the extra 10% GST into the total price of the vehicle; thus it will be more expensive to purchase a second-hand car after July, 2000. However these pressures can bring about positive benefits. For example, tariffs on vehicle parts have been lowered, consequently reducing the cost of inputs and applying pressure on local supplier for better, more efficient performance. But some customers will still be reluctant to follow this expected trend, as the full input tax credit won't occur until July 2002.

3.2.2. Technological changes:

Technology in the automotive industry is advancing at a rapid rate, in that we now see electronic maps, TV sets, CD players, etc, being built into cars for the sake of entertainment. But there have also been pressures placed on the automotive industry to improve the standards of their vehicles, engines and components to reduce the amount of gas emissions, use of resources and fossil fuels, and to provide a better quality of life through better engineering of cars that are/will be more environmentally friendly. Holden and Toyota are one of the first organizations to take the steps to meeting these goals, they have both designed, research and developed a Hybrid concept car, which has been built to reduce air pollution, fuel consumption and preserve resources. Test dummies and safety are also another form of technological pressure as organizations must continually upgrade and improve the standards of their cars so to meet the safety requirements set by government bodies. Organizations must ensure that the cars will not only meet these requirements, but strive to produce a car which is the 'safest' and one which will provide customers with peace of mind.

3.2.3. Demographic forces:

Demographic factors/forces must be taken into account by all sectors and segments in the automotive industry, as this information will aid in the marketing, research, development, design, etc of current and future cars. Currently statistics and trends indicate that the slowing of population growth and the increase in the number of elderly people in the community will reduce the demand for vehicles. This will reduce demand for other, if not all motor vehicle related services, as this group of people are not likely to use or replace their cars. However statistics have also indicated that the majority of the population are seeking more independence and less dependence on the traditional family (father, mother and 2.3 children; where the parents are the income earners, and provide the income structure for the family), therefore we should see an increase in sales of vehicles made and automotive services used.

4. Conclusion:

In conclusion, the motor vehicle industry involves more than just producing and purchasing vehicle, it involves many sectors which interconnect, and when influenced by the macro or microenvironments, they cause a ripple effect which affects the whole industry. The outlook for the future within the next 12 to 24 months seems to be brighter than currently. The confusion with the GST will hopefully, if not cease, be reduced and customers reassured, thereby the "postponing of purchasing vehicles phase" will be over and sales and production may resume. The industry overall will face many competitors and the industry will be more competitive than it has ever been before, as we will see a fall in vehicle prices and an increase in the number of imports. Local automotive organizations must at least maintain or better yet improve standards in both quality and customer relations, so to strive in the near future. We will see an introduction to a whole new set of vehicles designed for the next generation, advanced in technology, comfort, cost efficient and environmentally-friendly Hybrids which will run on electricity. Before you know it, they'll be running on water, if not the air pollution which they once generated!

It's a bright, but competitive future for the motor vehicle industry

Word count: 2129 words

BIBLIOGRAPHY:

  1. Kolter, P., Armstrong, G., Brown, L. and Adam, S. (1998) Marketing (4th Ed), Prentice Hall of Australia: Sydney
  2. Bradmore, D., Joy, S., Kimberly, C. and Walker, I. (1998) Marketing Visions: Readings in Marketing (2nd Ed) , Prentice Hall of Australia: Sydney
  3. Bradmore, D. (1990) Australian Marketing Dictionary, Macstyle Publishing Company: Melbourne
  4. www.Autonet.com.au
  5. www.Austrade.com.au
  6. www.ABS.gov.au
  7. www.automotiveworld.net
  8. www.buseco.monash.edu.au/SUBJECTS/MKX/MKX1120 (links on web site home page)
  9. Dow Jones Interactive (DJI) - articles and journals on motor vehicles, GST, impact, sales, production, Hybrid, and technological.
  10. IBIS World - C2811 Motor Vehicle Manufacturing
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