Trends Affecting Carmakers In The US: PEST Analysis

Political Factors

Discuss about the Trends Affecting Carmakers in the US.

The robust growth in technology has differently affected the users’ behavior as well as market trends across the globe. Customers are striving to remain digital and have preferred consuming or using products that make them stay fashionable. On the other hand, most companies through research and developments, they have unearthed the essentiality of total embrasure of technology to ensure they remain relevant. However, this analysis is based on the manufacturing industry and particularly focus on the carmakers in the US (Ann Arbor, 2010). The ever-changing internal and external environment has posed a threat to a smooth operation of Ford, General Motors, and more companies that manufacturers their products in the US. In this assignment, the PEST analysis tool has explored the political, economic, social and technological metrics as follows:

Usually, political factors significantly affect the performance of most business. It is a broad subject that constitutes the government policies, politically stability, taxation, and others. However, these factors do not always hinder the performance of the company, but their effects are determined by two primary aspects. It is either the political environment is favorable or unfavorable. If it is favorable, businesses will flourish and take advantage of the opportunities offered by the government (Housing Industry Association, 2011). The US carmakers have been influenced in various ways based on the political environment. Firstly, the government supports for innovation and created have significantly assisted Ford, GM, and other companies to manufacture up to date cars such as the electric vehicles, automotive vehicles that have extended their usefulness by boosting upcoming companies like Uber (Sean and Debbie, 2008). Also, the increased government efforts in developing infrastructure, for instance, the construction of railway lines to enhance the shipment of vehicles from the River Rock to the local dealers in the United States (Sean, et al. 2008). However, the industry is going to be affected by the new speculation that President Donald Trump is going to charge a tax of 35% to companies that manufacture vehicles outside the US and sells them in the US. If such tax rate is approved, then it will be a great challenge to companies like Ford which had opened a manufacturing plant in Mexico where the cost of inputs is relatively small.

Apparently, the US has a real history of economic stability that is not enough to enhance the performance of these companies. It is apparent that some of the vehicles are sold globally. With the increasing strength of the dollars, the profit margin for carmakers is negatively affected. The attractiveness of US vehicles and products will be relatively low because of the power of the dollar. However, this aspect will not be a challenge for the products sold in the US markets and other economies that use dollars. Also, the market in the US has been stagnant because of reasons like the introduction of smartphones which has attracted the attention of most youth. With the fact that the middle-income earners are striving to make the end meet, most people are not interested in acquiring more vehicles (Kim and Debbie, 2008).

Economic Factors

It is a critical element that most companies in all industries have immensely focused on in sharpening their competitive edge. The US is a developed country and most processes in the companies are automated to create efficiency and further reduce the cost of production (Mechler, 2007). However, the changing customers needs, increased rivalry in firms are just some of the reasons why most companies have considered innovation as the only way to go to remain relevant. This industry has passed various stages of innovativeness and customers are always expecting better products from the manufacturers (The Wall Street Journal, 2010). For instance, some manufacturers have applied the technology to manufacture driverless cars and flying cars. It has thus been a challenge for the industry to keep up with the pace of development (Wang, 2009). Furthermore, technological advances have necessitated for the productions of cars to suit new transport business that has emerged as the case of Uber.

The industry is subject to the influence of social factors. With the introduction of automobile cars, the entire society in the US has been revolutionized. At the first time, such vehicles were perceived to be meant for the wealthy. However, the acquisition of these cars by most people including the low-income earners in the US has demystified the belief. As a result, the market demand for cars steadily increased. It led to significant sales in 2015 which almost equaled the 2000 sales record that is still unbroken. Other social effects include the congestion of vehicles in the main towns are also major blocks to this industry. Furthermore, lives of people have positively impacted the ease in transport has facilitated translocation from one place to the other.

Therefore, the manufacturers of products in the automobile industry have to succinctly understand all these factors to aid them to establish strategic measures to handle the challenges. Most importantly, these companies should capitalize the opportunities and strengths to assist in thwarting adverse effects caused by these difficulties.  Lastly, the analysis of the industry using PEST will significantly help the manufacturers totally embrace technology enhance the safety of the vehicles and further meet users demands (Gillespie, 2007).

Apparently, it is poisonous to assume that the trends happening in one country will be applied to another country. That can be blatant lies. However, some factors that are beyond human control can occur globally, and others that are caused by people's characters cannot be applied to other countries (Joel, et al. 2015). For instance, a state that experiences serial cases of political instability, the companies that operate on such land will be adversely affected. This factor relates to the nature of political leadership and does not imply that all leaders across the world are that good. Therefore, I strongly disagree with the option of concluding that factors influencing carmakers in the US will uniformly affect them in other countries. Some of the justification includes differences in leadership, differences in business policies, differences in consumers’ purchasing powers, differences in infrastructural setup, differences in the distribution of wealth, differences in technological know-how, and others (Mazur, 2006). It is, therefore, dangerous to make a conclusion based on the trends experienced in the US.

Technological Factors

Concerning new developments occurring in the transport industry in the United States, it is apparent that carmakers are imperatively required to provide cars and vehicles that can outfit some of the challenges faced. Most of the changes are posed by the technological developments that have catalyzed the manufacturing of cars and vehicles that are efficient, self-driven, consume less fuel, uses electric current to move and more. The increased innovation has however created another kind of competition where carmakers are required to attract and convince customers that their models are the best. For a competitor like who has innovated a new product to survive in the US transport market has to embrace various strategies (U.S. Department of Commerce, 2015).  Firstly, the differentiation strategy should be utilized to create uniqueness in the products (De Wit & Meyer, 2010). This strategic model can assist companies like General Motors, Ford, and others to provide different vehicles that can suit customers’ preferences. This seasonality focus is a disadvantage to the consumers because they sometimes feel neglected by the producers. Carmakers should further stay in contact with users will enhance good reputation and consumers can know how to use the new models developed by the company (Mechler, 2007).

Secondly, the competitor should utilize the premium strategic aspect. Through this technique, the focused differentiation should target a particular segment of customers and provide products that customers specifically require. Selling differentiated products at a relatively lower price is the most important strategy that carmakers should apply to cope up with stiff competition in the markets. The US has different varieties of customers (Michael, et al. 2016). It is indeed clear that a traditional company has a good reputation and consumers like its products because of the brand name. Therefore, introducing a new product and selling it at a fair price to a particular group creates a competitive edge. Additionally, the competitor should on maximize the economies of scale. Though the US market is concentrated, still carmakers manage to sell a large number of the cars if produced in large amount and sold at fair price (World Economic Forum, 2009). The economies of scale will therefore, allow the manufacturers reduce production costs and offer the products at affordable price.

References

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De Wit, B. & Meyer, R. (2010) Strategy: Process, Content, Context. 4th ed. Hampshire, United Kingdom: Cengage Learning EMEA.

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Gillespie, A. (2007). PESTEL analysis of the macro-environment: Foundations of Economics, Oxford University Press, USA.

Joel ,C.G., Dan, B., & Martin, M. (2015). "The Decline and Resurgence of the U.S. Auto Industry". Economic Policy Institute.

Kim, H and Debbie M. (2008) Contribution of a Vehicle Infrastructure System to the Economy of Michigan: Economic and Industrial Impacts Update and Benefit-Cost Analysis. Center for Automotive Research.

Michael, R., Steffen, G., & Christian, W. (2016) How Automakers Can Survive the Self-Driving Era: Retrieved Feb 7, 2017 from https://www.atkearney.com/documents/10192/8591837/How+Automakers+Can+Survive+the+Self-Driving+Era+(2).pdf/1674f48b-9da0-45e8-a970-0dfbd744cc2f

Mazur, E. (2006). World of Cars 2006/2007: Worldwide Car Catalogue. Warsaw: Media Connection

Mechler, K. (2007) General Motors: Innovations in American Social Class Structure

Sean, M and Debbie, M. (2008) Country of Origin: Is this Vehicle Domestic or Import? The U.S. Domestic Content Measurement Programs: Center for Automotive Research.

Sean, P., McAlinden, K. D and Debbie, M.M. (2008) CAR Research Memorandum: The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers. Center for Automotive Research

The Wall Street Journal (2010) Technology Levels Playing Field in Race to Market Electric Car. Retrieved from <https://online.wsj.com/article/SB123172034731572313.html>

U.S. Department of Commerce (2015). The Automotive Industry in the United States.

Wang, H. (2009) Betting on Chinese Electronic Cars: Analyzing BYD ?s Innovation Capability. 17^th Gerpisa International Colloqium Sustainable development in the automobile industry: changing landscapes and actors, Paris 17-19 June.

World Economic Forum (2009) Global Competitiveness Report 2009-2010, World Economic Forum. SRO-Kundig: Geneva, Switzerland.