Industry Market Prediction For Automobile Industry

PESTLE Analysis

Political:

• Escalates of trade war within US and China:
• Donald Trump has impose new tariff of $200bn on Chinese goods arriving in the US from September 2018 and he also warn foreign countries to agree “fair” trade agreement with US to avoid facing higher import tariff as China.
• Beijing is planning to counter tariff of $60bn for US goods where had raised 40% of tariff on imports of US autos
• Impact: 60% of respondentsin automobile industry respond that the combined tariff are reducing their profits and increasing manufacturing costs and a quarter of respondents are relocating China-based manufacturing to Southeast Asia.

Economic:

• Growth in GDP:
• World: There has been an increase in GDP from 3.50% (2015) to 4.25%.
• Moderate slowdown in growth of the world economy in third quarter 2018:
• Affect by geopolitical tension and latest trade-policy development
• Fluctuation in global market stock and trade tension
• Impact: Uncertainty market, increasing risk, market share of automobile industry might drop and this may have an impact on profit
• Pressure on currencies:
• Currencies of some large emerging market has increased significantly due to higher US interest rates
• Increasing in fuel price:
• The international price for WTI Crude oil and Brent Crude Oil in October 2018 were nearly 50% higher than last 3 years
• The price of fuel has been between 70 to 80 USD per barrel
• Impact: Increase in fuel price will encourage car users to consider to turn to use public transports and caused the drop of sales in automotive industry
• Increasing in world price of steel  
• China levies additional tariff to control its exportation which fell by 34.3% in 2017
• Also affect by US protectionist measure
• Impact: Increase in cost of raw material in auto market will reduce profit margin

Socio cultural:

• Digital economy is transforming automobile buying process.
• 81% of people are unsatisfied with the retail buying process which is costly and inefficient middleman are involved who charges higher fees
• 97% of customers purchases after undertaking research online beforehand and 72% will buy online if they could
• Impact: Automobile industry is facing transformation into digitalization while interacting with the buyers. This could save operating cost and increase profit margin
• Health concern:
• People are willing to pay to avoid health problems caused by air pollution.
• Several urban areas banned older diesel cars
• Impact: Growth of demand in environmental friendly vehicles, carmakers promote technology as a solution to climate change

Technological:

• Electric and driverless vehicles
  • The technological advancements are relevantly conducted by Daimler, where electric vehicle is being built by the company. In addition, driverless vehicles are being tested by the company constantly within the supervision of the Google technology.
• Electric mobility
  • All-electric vehicle, F-cell and Fuel-cell vehicles are mainly produced by the automobile, which is relevantly increasing the level of revenue from new car sales.

Legal:

• Clean Air Act, Title II:
• An overall air pollution control policy has been to reduce automotive emissions
• German’s clean-air agency tend to push ahead with stricter emission standards for autos
• Impact: Automaker will be required to reduce vehicle emission by invest more in new technology

Environmental:

• Alerts in environment protection:
• World Health Organisation (WHO) states evidence that 91% of the world population lives in places where air quality exceeds WHO guideline limits and 4.2 million deaths every year as a result of exposure to ambient air pollution.
• EU Council agreed to set stricter CO2 emission standards for cars and vans
• Impact: Automotive industry is ready to build cleaner cars by investing more in innovation

The PESTLE analysis states that automobile industry is greatly affected by the external factors and hence the industry has been making plans and policies with the help of which they can make use of the benefits that are being offered and resolve the risks and the issues that are being faced to the external factors.

Each and every industry has their mode of entry and the ease of entry determines the number of competitors that operate in the industry. In this manner the threats of new entry that are available in the automobile industry are addressed as follows:  

• High Quality and Prestige needed:
  • The threat of new entry is relevant low for this industry as the prestige and product quality of the organisation is unique in comparison to new entrants, which cannot provide the level of sophisticated products to the client. This might not adequately affect the current operations of the organisation, while reducing the total risk from new entry. The low threat of new entry ensures the industry to maintain their current operational condition and generate high level of revenues from rising sales.

• The change in government policy regarding Co2 emission is also hindering new entrants in the automobile industry, as it increases the level of cost, which hampers their current operations.
• Use of solar based energy sources with the help of which eco-friendly products can be brought into the market

The threat of new entry is a strong force as new entries can increase the level of competition.

Threat of Substitutes:

Substitute goods have a direct impact on the automobile industry. It is seen that there are various other substitutes in the country and hence steps and measures are taken in order to minimise their impact. The various issues related to substitute products are addressed as follows:   

• Other forms of transport
  • The threat from substitutes are relevantly not considered, as the individuals attracted to automobile will not substitute to other forms of transport such as trains, bus and bicycle. The substitutes do not affect the automobile industry, which ensure Daimler to maintain their current operational level. Hence, there is low threat of substitutes for automobile industry, which relevantly ensures their continued existence.
• Maintain competitive edge
• Providing the best service at a reasonable price range

This is a weak force as the chances of substitutes entering the market are low. It is due to the fact that the market requires a lot of investment and currently there are big players who are operating in the market.

Supplier power:

The suppliers are the ones who provide all the intermediary products and the raw materials that are essential to manufacture the final product. The power of the suppliers needs to be determined in order to create plans and policies with the help of which these issues can be determined. The scenario of the suppliers in the current automobile industry is explained as follows:

• Low supplier power:
  • The supplier power in the automobile industry is relevantly low, as there are many auto parts manufactures that can be used by the automobile companies to compete their production process. Hence, the supplier power can be conducted, as low in the automobile industry, due to the high availability of suppliers of auto parts manufacturer. This relevantly allows Daimler to reduce the level of cost, as there is competitive pricing, which substantially increases their current operational conditions.
  • Some of the major industry suppliers are Exterior: Polyplex, Switzerland, Interior: TAKATA PETRI, Japan, Mechatronics: Mitsubishi, Japan, Chassis: Kirchhoff Witte, Germany, and Powertrain: Elring Klinger, Germany. Hence, good relationship with them has to be maintained
  • All the queries of the suppliers are met with utmost importance and the queries are resolved with the least time

This is even seen to be a strong force mainly due to the fact that suppliers and their power can determine the amount of production.

The purchasers determine the demand of any product in the market and therefore various plans and promotional policies are created with the help of which they can attract customers. The power of the buyers in this industry is explained as follows:

• Low sellers of luxury cars:
  • The buying power of buyer is relevantly low, as they are not able to bargain due to the low level of seller of luxury cars. The supplier is relevantly low in the automobile industry, where Daimler is one of the largest suppliers of luxury car. Hence, the lack of adequate suppliers is not initiating the barging power of the supplier, which will increase the level income for automobile companies.
• Provide new and innovative product ranges at a reasonable price with respect to the other companies
• Undertake customer surveys in order to have an idea about what the customers want and what changes are required in the current products that are being manufactured

This force is a weak one as the extent of luxury car manufacturer is low in the market.

Competitive Rivalry:

The extent of competition is able to determine the development in the market. There are several kinds of competition that are available in the automobile industry and they ar discussed as follows:

• High Rivalry of luxury car
  • The Competitive Rivalry of Daimler is relevantly high, as there are many companies in the luxury car segment, which has hampered problematic conditions for the organisation. The rivalry in the luxury segment is relevantly high, as competitions such as BMW, VW, and Volvo have adequate increased their operations to provide higher competition for Daimler.
• Maintain an effective research and development department where various kinds of experiments can be made with the help of which new kind of products can be manufactured
• Maintain a market research with the help of which an idea can be attained with respect to what the other companies are incorporating  

Porters Five Forces

This is a strong force as competitive rivalry can enhance the have an impact on the sales of a company. It is due to this fact that due diligence is given on this factor.  

Overall Conclusion

After the assessment of the strategies of the company it can be stated that best practise for the company would be maintaining competitive rivalry by bringing in new and innovative products in the market. With the use of new and advanced technology the company can bring in better quality products with the help of which competitive edge can be attained. It is even seen that supplier power is an essential aspect as well and therefore the company has to maintain a proper policy with the help of which the suppliers will be satisfied as well.

The above graph directly indicates the overall market of automobile industry in different market, which can directly allow the organisation to generate high level of income from operations. The evaluation has directly allowed that the market of China is relevantly rising for the organisation, as depicted in the above figure. The major markets for this industry in accordance with the sales are China, United States, Germany, United Kingdom, Italy, France, Japan, South Korea, Spain, and Canada. The sales of the organisation have relevantly increased over the period of two years in different returns, which is directly increasing the market conditions of automobile industry. Some researchers mentioned that detection of market share and overall demand from customer allows the companies to anticipate their current market conditions and future revenues from investments. By assessing the market, one can have an idea about the fact that automobile industry has a successful market future as with the advent of time the demand for automobiles will increase and accordingly future plans need to be constructed as well. 

The global demand for cars has relevantly increased from over the period of 1990 to 2018, which directly indicates the rising number of cars that have been demanded by customers. The rising demand of cars worldwide might eventually increase the level of revenues that can be generated from investment, while raising the chance of income for automobile industry.

There are several predictions that can be identified and each one of them is discussed. It can be predicted that with time the extent of demand for cars will increase. It is even predicted that revenue in this industry will increase as well. The other projection which has been ascertained from the analysis explains that the automobile market will increase and with the advent of globalization the expansion of the market will be faster. The last prediction after the analysis of the market states that automobile industry will be significant contributor to the economy and the changes in this industry would have an impact on the economy as a whole.     

Overall Conclusion

There are certain critical factors that can be detected for Daimler, which has relevantly allowed the organisation to generate high level of income from operations. The critical success factors are depicted as follows.

CSF

Consistency: The industry has been adequately been consistent in their current operations, which might eventually allow them to maintain high quality cars in their current operations. The company has been consistence in maintain the quality, which is considered as a critical success factor for the organisation.

Location: The location of the industry has been considered a critical factor, as the automobile industry in Germany is considered to be top notch, which allows them to adhere to the newest technology in developing new cars. This is in line with the aspects that have been addressed in the earlier stages of the report.

Fast Service: The service which might eventually improve the level of income, where it has increased demand for their products, has relevantly conducted sales. The industry has adequately provided high level of fast service of their products to the relevant customers, which can improve customer satisfaction and brand loyalty.

Variety: The automobile industry has relevantly increased the number of varieties in cars, which can be considered, as their critical success factors. The organisation provides vide range of cars from fuel efficient, hybrid and electric cars, which acts as their critical success factors.

Prioritised Opportunities

Prioritised Threats

1. The specific opportunities for the organization in the current business environment which is relatively is detected as hybrid vehicles, electric vehicles, higher market share in emerging countries, and autonomous driving cars. 2. The identified opportunities have relatively allowed Daimler and other automobile industry to focus on their future trajectory, which can eventually allow them to generate high level of returns from seals. The relevant opportunity is detected on hybrid and electric cars, which are demanded by maximum of the customers due to their capability to reduce carbon emission. 3. Changing preference of customers is relatively an opportunity to increase the market share in the current automobile industry and generate higher revenues by tapping into the new business prospect. 4. There is relevant opportunity for your organization in emerging markets where they can increase the market share by providing high quality products to relevant customers. 5. Moreover, the autonomous driving Cars that are currently in Trend and are being heavily tested by different organizations can be an opportunity, which can allow the management to acquire future technology that can enhance growth and revenues of the company.

1. The major limitation that can be identified for the organization is the reach touching of NAFTA that has been initiated by the President Donald Trump. This would relevantly hamper the level of operations that can be conducted by automobile producing companies such as Daimler. 2. Furthermore, the limitations are relatively incurred by Brexit, which is relatively hampering the growth of European Union and UK that has been major contributor to car sales. Therefore, the changes in Brexit and NAFTA restructuring is directly effective be operational feasibility of Daimler, which can negatively impact its revenue generation capability and act as a threat to with continuation. 3. Lastly, the rising fuel prices are also deriving the sales of cars down due to the excessive expenses that will be incurred by consumers. Thus, it could be understood that rising prices is a threat for the continuity of growing revenue. 4. With the advent of time, there are chances of new kinds of transportation modes and this can have an impact on the sale of cars. 5. The political policies and changes with respect to the automobile industry can have an impact on this industry and therefore in case of any changes this can determine the future of this industry.

The current strategic position of Daimler is relatively high in the automobile industry, as the organization has invested billions of dollars in research and development to ensure the continuity and development of the current product. In accordance to the Bowman’s strategic clock, the company is positioned in between hybrid and low cost cars. This has been shown in the above figure as well. The company with the help of their innovative technologies has been looking forward to manufacture hybrid cars so that the use of fuel and other non-renewable energies get reduced and the use of renewable energy gets increased so that the extent of pollution gets reduced. Selling the cars at lower price will even increase the sales and thereby revenue would increase as well. This would eventually help in improving the level of revenues that can be generated in future operations. Innovation has been you mean core value of Daimler, which is allowed your organization to be one of the innovative car manufacturers who has shifted their fuel consuming cars to hybrid and electric cars for reducing the carbon emission conducted by cars. Major strategic position of the company is its overall markets which they have captured around the world and trying to increase their exposure in emerging market. The company has adequately strengthened its position in the innovative field, which has relatively allowed them to invent new products that has enticed the customer and increase their competitive edge. The marketing and advertising condition of the organization is relatively high, which has allowed management to increase their competitive edge and maintain market share in automated car industry. Therefore, it can be detected that the current strategic position of Daimler is relevantly adequate, which can allow the management to acquire additional revenue in future and reduce the total cost of production.

Ansoff Matrix

The strategic position can be assessed with the help of this matrix.

Market Development: Market development is done with the help of assessing what the market wants and accordingly positioning the products so that the consumers can access the products with ease.

Diversification: This strategy is undertaken in order to broaden the product range. It is seen that there are various kinds of products will be able to satisfy various range of customers in the market.

Market Analysis

Market Penetration: This is one of the key strategies which is considered by the company and hence various plans and processes are created with the help of which the company is able to enter the market and increase their customer base.

Product Development: This strategy is effectively incorporated by the company as it is seen that the research and development department takes various actions with help of which new products and services are created.

There are four future strategies that need to be maintained by Daimler In future to increase the current operation capability and maintain higher revenues.

The one of four strategy that needs to be obtained by the organization in continued investing in research and development, which could relatively allow them to innovate new products and refine the existing one.

The second strategy that needs to be implemented by the organization is the launching of new product with the customization of customer preference, which would eventually help in tracking more customers and insurance highest sales group in future.

The third strategy that needs to be embedded by the organization is the investment in service quality, which is relatively, allows the car manufacturers to increase customer loyalty and create brand awareness among potential customers. The continued services after the sale of the car would eventually allow the management to creative brand loyalty, which would initiate higher sales in future.

The fourth strategy of the organization is to capture emerging markets and economics for increasing the level of sales and revenue generation capability.

There are certain future uncertainties as well. It is seen that due to certain external risks like political and economic disparities the company and the automobile industry may face issues that can have an impact on the future development. Plans and policies have to be prepared with the help of which the issues and risks that the company may face in the future can be averted.

From the evaluation of the sustainable test system can be detected from the overall appendix 1, which can adequately indicate the overall income that can be generated over time. In addition, the sustainability test indicates that 3 options detected for the organisation is positive, which indicates that three options selected can be achieved over time. This is found to be one of the competitive positions for the company.

The feasibility test directly indicates that the identified options can be accepted by shareholders of the organisation, as it aims in generating high level of income. The option is accepted by all the shareholders of the company, as they aim in increasing profitability, growth and achieve suitable income.

Strategic Business Unit Market Prediction

The winning strategy of Daimler is the adoption of innovative technology, which can improve their current operational capability and generate higher revenue in future.

Winning Strategies that can be incorporated

The increased exposure of the company in developing new electric and hybrid cars is significantly an advantage, which reduces the carbon emission of cars.

The winning strategy of Daimler is to increase the level of operations in newer technology, which can generate high level of income from operations. In addition, the second winning strategy of Daimler is to increase their market share in emerging markets, which has high level of demand for luxury cars.

This rising demand in emerging countries would eventually allow the organisation to generate high level of income from sales in new country.

This rising revenue is mainly considered the winning strategy for Daimler, as it might generate high level of income, while raising the future prospects.

Some researchers stated that identification of winning strategy directly helps in determining the future revenue prospects that can be generated by the organisation over the period. The winning strategy has relevantly depicted the improvement in operations and new market entry needs to be conducted by Daimler in future for increasing the level of revenue and capture new market, while raising the level of customer base and loyalty.

Type of Risk	Risk	Action	Manage Risk
Strategic	Competitive risk	Mitigation	The risk can be managed by adding high level of marketing and advertisement activities. The risk from competition can be mitigated, which might eventually allow Daimler to increase their operations in future.
Financial	Industry risk	Mitigation	The risk can be mitigated by using low cost production facility in different counties like China for reducing the financial risk. The decline in the financial risk can be mitigated by adequately lowering the cost of product and maximising the profits from operations.
Compliance	Brand risk	Mitigation	Increased Promotion and creation of sustainable product have low carbon emission, while reducing brand risk. The brand risk can be mitigated by increasing the online and market exposure by conducting relevant advertisements.
Operational	Product Quality risk	Mitigation	Increased quality checks might reduce the risk and ensure high quality products
Managing Change	Product Risk	Mitigation	Assessing the market from time to time and incorporating new and improved technologies with the help of which the innovative products can be created.

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