1. Assessment Task 1 - Individual Authentic Learning Case-Study Assignment (1200words) Individual Authentic Learning Case-Study Assignment 1200 words Topic: Discuss the worldwide motor vehicle industry, inclusive of a background to the study, an external environmental analysis inclusive of a Five Forces and political, economic, social and technological analysis. A final element of the discussion should explain why motor vehicle manufacturers import rather than manufacture in Australia. Purpose The purpose of Assessment Task 1 is to undertake a strategic analysis that involves three sections: 1) Background to the study including a brief history of the world automotive industry; 2) A Five Forces model explaining the new car motor vehicle import industry as this applies to Australia OR a Five Forces model explaining the worldwide new car motor vehicle industry; 3) Explain why car manufacturers prefer to import rather than manufacture in Australia. All three sections of this assessment task must have references to the strategic management academic literature from peer reviewed journals. There must be at least three references to the Subject core text in whole submission. General rules: Students must demonstrate an engagement with the Body of Knowledge. This is demonstrated through the application of at least one relevant reference per 150 words, or a minimum of eight (8) references in total. No article may be referenced more than twice; The submission must have an introduction, a main body, a conclusion and a bibliography. Headings and sub headings may be used. All three sections of this assessment task must have references to the strategic management academic literature from peer reviewed journals. Case Study (60 mins) The purpose of this in-class case study is to prepare students for the first assignment and consider the external strategic environment that affects the firm. Read the articles below and consider the questions that follow: The Japan Times, Sep 30, 2008 Foreign automakers race to set up in Thailand With tax breaks, infrastructure improvements and other incentives, the Thai government is helping carmakers build the 'Detroit of Asia' by Hiroko Nakata Currently, Japanese automakers are responsible for most of the nearly 1.3 million vehicles churned out by the nation’s factories. With its open policy, good infrastructure and competitive labor market, the country has attracted parts makers along with the auto companies. “There are layers of supporting industries for automakers in Thailand,” said Atsusuke Kawada, vice president and senior economist at JETRO (Japan External Trade Organization) Bangkok Center. “It is a very important reason why they focus on this country as a production center.” Putting its money where its mouth is, the Thai government in 2007 promised to give tax breaks to ecology-friendly carmakers. Within the first five years of startup, a maker that builds at least 100,000 cars that emit no more than 120 grams of carbon dioxide per kilometer and get at least 20 km to the liter will be exempt from corporate taxes for eight years. The car tax that consumers pay for these vehicles will be lowered to 17 percent, compared to 30 percent for other cars. Seven automakers responded to the offer: Honda, Toyota Motor Corp., Nissan Motor Co., Mitsubishi Motors Corp., Suzuki Motor Corp., Germany’s Volkswagen AG, and Tata Motors Ltd. of India. “Such incentives and an expectation of rising demand for compact cars are the biggest reasons why foreign carmakers want to increase production of eco-cars in Thailand,” said Koji Sako, a senior economist who tracks Asia at Mizuho Research Institute Ltd. Industry sources say high gasoline prices will continue to draw Thai drivers to fuel-efficient compact sedans, rather than traditionally popular pickups. For Japanese makers, Thailand is poised to become one of the most attractive production centers because rising labor costs have slowed their investment in China, Sako said. However, Thai vehicle production is still 14th in the world. Even in Asia, it trails Japan, China, South Korea and India, according to data released by the Thailand Board of Investment in July. Unlike these countries, Thailand lacks a domestic automaker with its own brand. Consequently, the country must look to foreign makers such as Toyota, Honda and General Motors for growth. So far, business has continued to expand. Honda, in addition to building the second Ayutthaya plant, has boosted Thailand’s role as a regional production hub since 2007. “We set up a new system, which helps Thai workers to support production not only in the (ASEAN) region but also outside the region,” Fumihiko Ike, president and CEO of Asian Honda Motor Co., told a news conference in Bangkok in September ahead of the release of the City, the first model assembled entirely by local workers. When Honda launched a new model here in the past, Japanese engineers flew to Thailand to support local workers. But now, the local center takes the initiative in learning the design and procuring parts for the new model. Workers from the Ayutthaya complex also train Honda engineers in other nations such as India and Pakistan. A total of 350 engineers from five other nations spent a total of 4,000 days gaining knowhow, Ike said. Next year, the second-biggest Japanese carmaker will also expand its Thai research and development center, set up in 2005, to reinforce the selection process for component makers. “To boost our competitiveness in the region, the local R&D center is very important,” said Adisak Rohitasune, senior vice president of Asian Honda Motor Co., headquartered in Bangkok. The Ayutthaya plant not only assembles cars for the Thai market but also exports them to 36 countries ranging from members of the Association of Southeast Asian Nations to markets in Africa, the Middle East, Australia and New Zealand. Meanwhile, Toyota Motor Corp. in 2004 chose Thailand as the first production site for its innovative international multipurpose vehicle (IMV) project, which aims to build vehicles outside Japan and export them to other countries. Japanese aren’t the only automakers interested in Thailand. GM announced in August it plans to construct a diesel engine plant on the site of its assembly plant in Rayong, Thailand. The U.S. auto giant will invest $445 million to build the new plant and renovate the old one. When completed in 2010, the new plant will have an initial annual production capacity of 100,000 engines, GM said. Japanese companies began actively investing in Thailand in the 1990s amid the liberalization of ASEAN economies. But after the Asian currency crisis hit the region’s economies in 1997, Japanese firms boosted exports of their made-in-Thailand products to other countries, said Mizuho’s Sako. In addition, Thailand’s policy to open the market to foreign investment and promote FTAs in 2004 and 2005 under former Prime Minister Thaksin Shinawatra attracted many Japanese companies, Sako said. Unlike China, where foreign firms need to set up joint ventures with local companies to enter the local market, the open Thai market is attractive for many Japanese firms because they do not have to worry about a technology drain, Sako said. As a result, there is a cluster of 7,000 to 8,000 small and big Japanese firms in Bangkok, he said. But there are concerns. Sako said increasing exports from Thailand could increase trade friction with surrounding countries. If exports from Thailand mark a steep gain, the baht is likely to jump against other currencies. An overly strong baht would eat into profits of Japanese makers on their made-in-Thailand products, he said. Another concern is political uncertainty. In 2006, then Prime Minister Thaksin was ousted in a coup. “Political stability is a must for long-term investment,” JETRO’s Kawada said. He said clashes between supporters of the Thaksin administration and antigovernment protesters continue in the center of Bangkok. “Unless the country has a more mature democracy, some foreign makers could start becoming cautious about investing for the long term,” he said. Mizuho’s Sako said foreign firms will need to keep an eye on the country’s open policy for foreign investment. “It is always a concern whether the Thai government reviews its open policy for foreign firms,” he said. But Sako added it is hard to expect the government to actually step back from the open policy because it already built up an economic structure that benefits from foreign investment. The Conversation July 26, 2013 6.11am AEST FactCheck: do other countries subsidise their car industry more than we do? “By international standards our support [of the automotive industry] is modest, so we have to work hard to attract the new investment.” – Industry minister Senator Kim Carr, Lateline, 22 July. The idea that the future of car manufacturing in Australia is on shaky ground is nothing new. But Carr’s comments come at a time where both major parties are trying to convince the sector and voters that their policies will keep the industry alive. Prime Minister Kevin Rudd met South Australian premier Jay Weatherill last night, with reports suggesting more government assistance might be on the way for Holden. So when it comes to supporting auto manufacturing, how does Australia compare internationally? The answer depends somewhat on how you define “support”. Direct subsidies usually comprise cash injections. But there are also indirect subsidies, which are more opaque and more widespread. These can include tax incentives such as research and development tax deductions and export subsidies such as tax deductions or any other direct financial contribution to an exporting industry. Tariff protection also provides a form of subsidy, as tariffs tax imports, meaning other products are less price competitive. Similarly, luxury car taxes can give locally-produced vehicles a competitive edge. If we just look at direct subsidies and tariff support in Australia, under the current Labor government car plan $A5.4 billion will be extended in subsidies to the industry over 13 years from 2008 to 2020, totalling about $A415 million a year. Over the last 10 years or so, Holden has received $A1.8 billion - $A150 million each year from a potential $A2.17 billion pool - while Ford has obtained an estimated $A1.1 billion. Toyota will not comment officially on subsidies, but it is estimated the Japanese company received about $A1.2 billion in the last decade. So in per capita terms (see Table 1), Carr is correct: government funding is modest in comparison with other developed countries, such as Germany and the United States. Table 1. PPB Advisory Automotive, May 2013. When you look at the cost of government funding for each vehicle produced, Australia sits in between these two countries. Each Australian unit costs the taxpayer approximately 1.5 times that of a German vehicle but only around 67% that of a US-produced vehicle, despite the scale economies available to the American auto industry. How do we compare? When you compare Australia to a few other key markets, our direct subsidies are dwarfed by those overseas. For example, in the United States, the Bush and Obama administrations allocated $US80 billion to direct assistance under the Automotive Industry Financing Program. This included rescuing automotive firms’ financing operations, such as the General Motors Acceptance Corporation (GMAC). There were also debt guarantees. Treasury notes that it has recouped almost $US51 billion of the $US80 billion allocated to the program. An extensive New York Times investigation found that Chrysler received at least $US1.4 billion since 2007 from 14 grants in 3 states. GM received $US1.77 billion from 208 grants, while Ford was awarded more than $US1.58 billion from 119 grants. The Canadian automotive industry, which has some similarities to Australia’s, also received $CA4 billion in loans in 2008, alongside manifold existing federal and state subsidies for GM Canada and Chrysler Canada. These loans were also extended beyond the 2008 financial crisis. The European Union The European Union also heavily subsidises its industry. Most recently, considerable French subsidies have been announced for “green” or electric vehicles. And in 2009, Germany introduced a €5 billion “cash-for-clunkers” scheme. EU countries have also employed state aids extensively from the 1980s, like investment aids, export credits and insurance, corporate rescues, research and development contracts, and direct cash injections into public and private-sector firms. National governments also provide (overtly or covertly) discounted loans or (sometimes unlawful) subsidies to firms. The EU auto industry remains the recipient of considerable direct and indirect subsidies as a consequence of these complex national and EU policies. But it requires wading through thousands of pages and years of reports on state aid in order to gain even an approximate notion of the level of support afforded the automotive industry and other manufacturing sectors in Europe. Costs of production In Australia, the domestic manufacturers in 2012 produced approximately 140,000–150,000 vehicles. This represents a minuscule proportion of global vehicle output, which accounted for 63 million units in 2012. Australia ranked 29th among domestic vehicle manufacturers in 2011, with 148,000 units, which is only approximately 10% of total domestic vehicle sales (see Table 2 below). Table 2. 2012 figures based on industry estimates. : Key Automotive Statistics 2001-2011. 2012 figures based on industry estimates. But it’s important to note that the unit cost of Australian-made models is four times that of Asia and twice that of Europe, according to Ford Australia’s comparisons with its international manufacturing costs. Consequently, the lack of scale, the costs of importing key components and labour costs result in higher unit costs for taxpayers compared with more heavily-subsidised, but more efficient producers, such as Germany. By contrast, the Australian industry is more efficient and less costly to maintain in both per capita and unit costs than vehicles produced, for example, in the United States and elsewhere. Verdict Carr is correct: by international standards, annual assistance to the Australian automotive industry is relatively modest in raw dollar and per capita terms. Review This is a balanced assessment of the claim. It clearly defines “direct” assistance as cash transfers to car companies and tariffs on imported motor vehicles. These are both transparent, easily quantified and selective, as they only apply directly to the local car industry. On this measure, assistance to the local car industry is indeed modest compared to what other nations provide. Often in international comparisons of assistance to the industry, the measure is assistance divided by population. This is a figure often quoted by Carr as the basis for the claim regarding the “modest” nature of local assistance. If this direct assistance measure is applied on a per unit car production basis, government assistance moves from being modest to middle-ranking. This is because Australia produces many fewer cars than other nations. - Phillip Toner. 1.1. Assessment Task 1 - Assessment Criteria Assessment Task 1 Due Date % SILOs Assessed Individual Authentic Learning Case-Study Assignment 1200 words 11:55pm 25 August 2019 30 01 Results released during semester. This item will report on the Graduate Capability of Critical Thinking. Description of Task Read the case study from the LMS Assessment Task 1 Section. Submission Details LMS Turn-it-In submission only Grading Criteria and Feedback Criteria Weighting 1. Hurdle requirement Pass/Not Pass: No Marks are awarded in this criterion. a. The item has been presented in the medium of written English. Sentences are structured and conform to academic writing guidelines. The paper has an identifiable structure including an introduction, a main body, and conclusion. The paper follows the Harvard Referencing Style. The examiner can proceed with further assessment. b. The item has not been presented in the medium of written English and the examiner cannot proceed with further assessment. Sentences are not structured and do not conform to academic writing guidelines. The paper does not have an identifiable structure including an introduction, a main body, and conclusion. The paper does not follow the Harvard Referencing Style. 2. The response provides a background to the study, with reference to both the core text and the academic literature. This section has a total potential value of 10 marks. a. Exceeded (8-10 marks) b. Comprehensive (7.5-8 marks) c. Developing (7-7.5 marks) d. Met (5-6.5 marks) e. Not Met (0-4.5 marks) 3. The response provides both a Five Forces and political, economic, social and technological analysis. This section has a total potential value of 10 marks. a. Exceeded (8-10 marks) b. Comprehensive (7.5-8 marks) c. Developing (7-7.5 marks) d. Met (5-6.5 marks) e. Not Met (0-4.5 marks) 4. The response explains why car manufacturers prefer to import rather than manufacture in Australia. This section has a total potential value of 10 marks. a. Exceeded (8-10 marks) b. Comprehensive (7.5-8 marks) c. Developing (7-7.5 marks) d. Met (5-6.5 marks) e. Not Met (0-4.5 marks) 5. Examiner’s Comment. No marks are awarded in this criterion.