Question One

The US auto market is changing at an alarming rate with the environment absorbing different projections regularly. Indeed, it is expected that the auto industry will change far much in the next five to ten years than it has changed over the last fifty years. To a large extent, the changes in the US auto market are based around external factors including political, technological, social and economic dynamics. The changes along with the anticipated projections have the impact of altering the companies’ operations to fit into the general realm of shape. Ford and GM Motors, being the leading auto companies in the US continually face trends that could spell a fortune or doom for their operations. Changes in technology have seen the prospects of having electric, auto-pilot cars while social trends in major cities suggest the embracement of public transport systems (Lee and Lovellette, 2011). All the factors have the potential of disturbing the normal operations of players within the US auto industry.

Perhaps the most dominant player in the auto industry is the issue of technological change and its consistency in today’s world. Today, the auto industry is gearing towards a future of technology that not even auto pioneers like Henry Ford imagined (Wright, 2016). Innovation is now a common focal point across the major players in the industry. For instance, the development of taxi-hailing applications and the sudden interest from technology giants present a threat to the normal way of operations. In addition, the emergence of electric carmakers such as Tesla usurps the conventional way of doing things. Every player is in a rush to grab a part of the new technology of cars that have internet access, can drive themselves and are electrified. These trends are highly influential in the determination of new markets and customer trends in the US auto industry.

Still, the industry continually faces the emergence of a range of political factors that are uniquely distinct to the US market. The main player in this regard is the current federal regulations requiring auto companies to produce fuel efficient vehicles in the next few years. In particular, companies are required to reduce their vehicle’s average fuel efficiency from the current 27 miles per US gallon to 54 miles per gallon by 2024 (Wright, 2016). The impact of this regulation is felt among the auto companies prompting the establishment and investment in electrical car manufacturing to meet the targets. Further, the current political establishment that puts in place numerous transit trains has an effect on the operations of the auto industry. It would be unwise to invest in markets that have high populations when the current governments aim to decongest the cities. The political alignment in these cities further complicates the trends forcing the companies to adopt only those products that conform to the current and future trends.

At the center of the current turbulence in the US auto industry is the existence of varied economic factors. The situation is further compounded by little understanding of the economic sphere since sales have not picked up with the recovery of the economy. Indeed, part of the reason for the decline in car ownership across the US is the decrease in earning power among young adults. The hard economic times have confined the millennial generation into settling down and having children rather than spending on cars (Train and Winston, 2007). In addition, the US auto industry has seen the entry of rival car firms with global economics including Japanese carmakers Toyota. The emergence of these competitors as low cost alternatives has denied the US auto companies a huge segment of the market. Combined, these economic factors have the implication of upsetting the current US auto industry setting.

Lastly, the US auto market is faced with trends arising from different social factors among the customers. The association of US citizens with pickup trucks has partly secured the future of traditional F-150 Ford trucks. The association is strong enough to dispel any trends in technology with the segment remaining highly profitable. Further, the change in social aspects regarding transportation has seen less car ownership across the US as more people embrace taxi hailing applications and public transport. More people find the use of taxi hailing applications as trendy and modern thus embracing the new technologies. Today, traditional patterns of vehicle ownership are being broken down through the increased use of the smart phone (Bailey et al., 2010). This, coupled with the need to settle down and have children among millennial generation has meant that fewer people have driving licenses in the US. The effect of social factors on the US auto industry is evident in the decreasing number of people owning vehicles.

Clearly, the US auto industry is facing a myriad of trends that cumulatively affect its structure and functioning. The PEST analysis reveals an inherent number of technological, political, social as well as economic factors touching on the industry. The emergence of new technologies including electric vehicles as well as automated driverless vehicles means that companies must adapt fast and take up the technology or risk collapse. In addition, changes in the political front means that companies must continually change their designs to meet the various regulations in place. Still, there are increasingly changing social and economic factors that impact on the general outlay of the industry. For instance, companies must conform to the varying social trends such as the use of taxi hailing applications. All of these factors actively influence the route taken by players in the industry.

Question Two

The current trends in the US auto market cannot be lifted and used as pointers of other auto industries in the world. While the changes affecting the US market are largely international and may be felt across the globe, others are specific to the US. In addition, the applicability of these trends in other markets is not guaranteed owing in part to the diversity of political, social and economic factors. For instance, the regulation requiring an increase in fuel efficiency is distinct to the US. Even if other countries adopted the same regulation, its timeframe would be different thus yielding different influences.

It would be highly dangerous for carmakers to extrapolate the trends within the US to overseas markets. Evidently, the dynamics in these markets are quite different thus prompting different approaches. For instance, the emergence of electric cars may take a few years in the US but take over a decade before adoption in other countries. Further, the difference in economic states in other countries requires a different timeline in the adoption of high technology. Lastly, the social setting of other countries is uniquely different and cannot be satisfied by products suited for the US market.

Question Three

The US auto industry is highly competitive with the leading eight companies dominating the market. In fact, it is estimated that the range between the leading automobile companies continues to narrow thus beckoning the entry of new players. With these developments, the US auto market is one of the very few that has little barriers to entry of new players. It is not surprising, therefore that companies such as Toyota have managed to penetrate the US market with minimal resistance. Despite the liberalization of the US automobile market, Ford and General Motors continue to occupy the top spots in terms of market share. As at 2010, no single company accounted for more than 20% of the US automobile market thus making it one of the most competitive across the world (Lee and Lovellette, 2011). Any company that intends to enter the US market should focus on the general transport segment of the market as well as electric and driverless vehicles.

The competitive stance of new entrants should be focused on the use of technology in using and selling the product. For instance, new products should encourage the use of internet as well as driverless technologies to tap into the growing demand for such products. The emergence of new technology in the US has heralded the increased adoption of taxi hailing applications. In part, the success of these technological developments lies in the increased use of the smart phone for both communication and information sharing. As such, most users regard the use of such applications as trendy and fashionable. In addition, the regulations within the US call for a reduction in the average volume of emissions in the next five years and any entrant should comply with these regulations.

In the next few years, the automobile companies will be competing based on their adaptability to new technology. In this regard, companies eyeing a competitive advantage should base their products around the use of technology. In addition, most of the urban cities are congested and authorities are working towards the decongestion of the towns through public transport systems (Train and Winston, 2007). One way of tapping into this market is the development of taxi hailing applications and the use of driverless vehicles. By employing such a strategy, the new entrant can be guaranteed of at least a share of the available market that is inclined towards technology. At the very least, these companies should base their strategies around technological adaptability.

 References

Bailey, D., De Ruyter, A., Michie, J., and Tyler, P., 2010. Global restructuring and the auto industry.

Lee, H., and Lovellette, G., 2011. Will electric cars transform the US market? Belfer Center. Available at: http://live.belfercenter.org/publication/21216/will_electric_cars_transform_the_us_vehicle_market.html

Train, K. E., and Winston, C., 2007. Vehicle choice behavior and the declining market share of US automakers. International Economic Review, 48(4), p.1469-1496.

Wright, R., July 11, 2016. US autos: Adding new routes. Financial Times (Accessed 18 February, 2017).

Do you need an Original High Quality Academic Custom Essay?