United States Automobile Industry Essay Example | Topics and Well Written Essays - 3500 words

United States Automobile Industry - Essay Example Automobiles are durable experience goods that sell for a fairly high price. Consequently, as the purchase of a car constitutes a large investment for the average household, the demand for cars is fairly price and income elastic and strongly affected by macroeconomic conditions, including income trends, employment, and interest rates (Adams and Brock, 1995: 68). Because we look at competitive performance within the industry, however, we do not consider the industry's overall performance and its impact on the national economy. The US automobile industry is highly concentrated, with domestic production dominated by a tight triopoly. The top three firms, General Motors, Ford, and Chrysler (the 'Big Three'), account for 98% of domestic production. This high concentration started mainly in the 1930s. In the first three decades after the automobile was invented in the 1890s, more than 80 firms existed in the industry, with a number of companies entering and leaving the market every year. The number of companies that managed to stay efficient and profitable, and that survived the Depression in the 1930s, shrank to eight firms in the 1940s (White, 1982: 143). Since then, the Big Three have merged with or bought the remaining domestic firms. In the 1970s, however, US auto makers first began to face significant foreign competition. German and especially Japanese car markers, which were already established in their home markets, entered the US market with small, efficient cars that provided stiff competition for domestic producers. Today, imports account for about a quarter of the existing US market share (as opposed to 0.4% market share immediately after World-War II). This trend is reflected in Figure 1, which shows the market shares of the Big Three over our sample period. This considerable gain in market share for the foreign companies resulted mainly from the oil crisis of 1979, after which US consumers began to value fuel efficiency over size and style. The importance of barriers to entry in this industry is widely debated. In general, a long-run barrier is any cost or factor that permits market incumbents to earn supernormal returns while deterring entry. Examples include absolute (capital) costs, economies of scale, product differentiation, sunk exit costs, strategic behavior, special resources or licenses, and other legal restrictions. Because both incumbents and new entrants appears to enjoy the same benefits of economies of scale, these do not appear to constitute a major entry barrier in the US auto industry. White (1971: 38-53) estimates the minimum efficient scale of production in automobiles to be about 400,000 vehicles per year, which amounts to only an 8-10% market share. Absolute capital requirements, however, may be more important. New entrants in the automobile market must build a variety of plants, such as engine and final assembly plants, that require significant sunk costs, and establish a distribution and a dealers hip network to sell 400,000 units. According to the Department of Transportation this can easily cost over a billion dollars (Adams and Brock, 1990: 110). This large investment for the new entrant, along with the uncertainty of future success, provides a relatively high barrier to entry. Auto Industry and US Economics The automobile industry has long been viewed

Global Marketing Operations Case Study Example | Topics and Well Written Essays - 750 words

Global Marketing Operations - Case Study Example Samsung has emerged stronger with global image by their innovative strategies that were globally focused, restructured, and streamlined to the target. Samsung achieved 70% of the business from outside Korea. The company remained very much Product- focused with attention on manufacturing. They believed in quality product that could take care itself to establish and to be preferred by consumers. But in today's world of competition this notion was mistaken and they had to change to become market oriented under the able leadership of Mr. Kim. In 2008, Samsung is expected to earn 9.27 trillion won, up from 7.4 trillion won last year, according to Reuters Estimates. The major objective of the company in 2008 is to be top three electronic companies in the world by 2010 with quality products, to double up their 2004 sales achievement of $55 billion by 2010, to have 20 number one market share in the compared to the present eight number one market share products, to identify growth engines of growth and pursue innovation through out its business operations. It is a fact that Samsung Electronics had been more a manufacturing giant than a market entity. In terms of marketing the company has been backward if compared with its rivals in the market such as Nokia and Motorola. The company started its marketing efforts late and yet they could not make highly visible brands particularly in the foreign market. The company is badly in need of signature product that will make its brand name stick in consumers' mind. The company is suffering from identity crisis. For example iPods of Apple is easily identifiable in United States as 'Anycall' phones of Samsung is identifiable in Korea. But this brand has identity problems in other countries. The real challenge is to build Samsung into a beloved brand into the mind of people who would love to have it and recall it any time. Cell phones account for 31% of Samsung's revenue and therefore needs intensive attention from the marketing manager. The company is planning to enter and succeed in emerging markets. The efforts of building the brand image can be resumed in these countries. Emerging markets have become highly competitive and it is very dangerous to take initiative here. But Samsung with its history of doing miracles with its products innovation can do it in marketing as well. In India about six million people are buying new mobile set every month. Nokia and Motorola are well positioned there even at low profit margins. They are active in the market to sell dirt-cheap handsets with hope to take over the high-end market in future. Samsung does not like to market these low-end handsets. They are catering to high end of the low-end market- 'the premier low end' in the price range of $50-$70. Samsung needs differentiation of its brand here in this premier low-end market. There are numerous consumers who bought high-end products in the past but and they are not happy buying the cheap products. Samsung with its superior image of building high quality products can focus its brands of low-end premium products without increasing the