The Car Industry

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Technological

Historically technological innovations and advancements were made in response to a reoccurring condition that challenged the performance or efficiency of a process. For example, the invention of the gasoline engine, which was the birth hour of the modern car, as we know it today. More often than not the innovation process used to create products, such as the gasoline engine, inspired other technology breakthroughs and discovering additional uses all originating from one basic concept. This process is still seen in today’s global environment. The only difference is today firms aim to reduce costs, improve products and services, and search for knowledge that will give the firm sustainable competitive advantage. For example, in developed countries new social and political developments are causing firms to create technologies in hopes to reduce the amount of materials and energy they use to build a car, or to increase the efficiency of the production process. Economists argue that such innovations can increase a firm’s profits and it’s international competitiveness (McNieven, 2009).

Twenty- first century technological advancements have forced managers to adjust their firm’s strategies. Now, success measurements relate to the firms ability to acquire and manage knowledge. This realization is dependent on a firm’s country’s culture, social capital, education, and entrepreneurship. MNE’s try to exploit synergies between advanced technologies and international investments to gain competitive advantage in their respective industry. However, in reality finding these connections and creating innovation process’ is limited to the nations social, economic, and political status.

Economic

Like social forces, economic forces, vary from country-to-country and continue to change over time. Auto mobile manufactures that track and explore the potential consequences of the economic forces are likely to be more successful and prepared for change than the firms that ignore economic indicators. According to Gupta and Gorindarajan (2003), the desirability of a market is depends on the structure of an industry (i.e. competitiveness of existing firms, bargaining power of suppliers/customers, and the threat of substitutes and new entrants). Progressions in communication technology have expedited the international outsourcing process, allowing firms to identify which country offers the optimal mix between cost and quality. Modern organizational structures need to keep in mind how to coordinate their international network and inspire new innovations on a global scale.

Michael Porter (1990) illustrate the basis for a nation’s competitiveness with a diamond diagram, where each of the four corners represents a core feature: factor conditions, demand conditions, related and supporting industries, and firm strategy structure and rivalry. Furthermore, Porter stresses that for a firm in any country or industry to be internationally competitive “it must have strong domestic presence of each of these four features they relate to their respective industries.” Following that logic, we can assume the future income and the growth of a nation’s firms will be dependent on the status of the four features (factor conditions, demand conditions, related and supporting industries, and firm strategy).

Some countries are more internationally competitive in one particular industry and not competitive in another, therefore the appeal of each country as a potential investment location depends on the business activities a firm is set out to accomplish. MNE business plans may influence by economic variables such as: inflation, unemployment rates, growth rates, and foreign exchange rates. Therefore, MNE must be conscious of each nation’s continuously changing macroeconomic variables when choosing investment locations. For example, technological advancements can increase a nations growth rate and income levels so that consumer demands change and present new opportunities for a MNE to exploit. Subsequently, MNE’s have become accountable for modifying and developing new strategies in response to economic forces. For example the raise of the middle class in China made China one of the most important markets for the car industry, all major manufactures are now in china or trying to enter. They are not only selling over here they are also producing in China. Many car manufactures have changed their models to fit the needs of the Chinese market. For example all German luxury car manufactures are selling L versions (long extra 15-20 cm) of their limousines in China. These versions are not available in other markets or have to be specially orders, where as they are normal in China.

Political & Government

Last but not least, recent changes in the global environment of political and governmental factors influence all of the previously mentioned categories (social, technological, and economic). Again cultural values outline the values of political forces that ultimately influence government decisions. Government regulations are important to MNE’s because they can influence the speed with which firms adopt information technologies, microelectronics, and e-business (McWilliams and Siegel 2007). Government policies continue to shift their focus from the domestic level to the international level, in part because they can cause misleading price ratios and thereafter affect trade patterns or act as a barrier for trade.

For MNE’s, strategies and management can be affected by the following policies: ownership, regulation, taxation, subsidies, and liberalization reforms. These policies inadvertently have lead to a paradigm shift of public policies to broaden their focus from national to international. In recent years the acceptance of international public policies speaks to: protection of intellectual property, pollution regulations, antitrust policies, and the internationalization of financial institutions. However, how to structure and enforce these new international public policies still needs to be resolved. For example, China’s rapid and significant expansion in the global economy has generated concerns about maintaining a fair playing field for international competition. More specifically, sanctions can alter already established trade and investment patterns, which could cause some nations to isolate themselves and increase protectionism. In conclusion, managers of MNE’s must be conscious and learn how to adapt to the ever-changing environment of business.

Marketing in Today’s Economy

Everyday changes in the global environment (i.e. faster communication, transportation,