The US Auto Industry Environment: SWOT Analysis

Strengths

The US automobile industry includes the largest automakers in the world: General Motors Company as the largest and Ford Motor Company as the second largest (Davis, Kim, King, Larson, Redmond & Schick, 2008). Other than having the world’s largest industry players, the US automobile industry also has the world’s pioneering automobile companies. This undoubtedly gives the industry in US an edge over the same industry of other countries in terms of world market leadership and model designs.

Being among the battered industries, the US automobile industry has been rescued by the government with its bailout package.

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This move serves to show the government support that the industry enjoys as well as the industry’s material role in the country’s economy. Indeed, the US automobile industry has become a mammoth industry that the government cannot allow to fail. Having enjoyed many years of economic growth and profitable operations, the industry players have become major contributors to the country’s total gross domestic product, gross national product, exports and employment rate.

Weaknesses

However, the same bailout package brings in consequences that would serve to limit the freedom of the automakers.

Hence, they would not anymore be free to launch new ventures or new products without government approval, which may take time to secure. Needless to say, the procedures and policies that bailout beneficiaries are now subject to would have a toll on its operations.

High fixed cost and constant Research &Development (Davis, Kim, King, Larson, Redmond & Schick, 2008) have been crippling most of the industry giants. This is among the reasons why despite the recent plunge in the demand for the industry’s products, the automakers were unable to easily switch to a lean mode of operations. Their overwhelming fixed costs eventually led the big players to cry for help.

The increasing bargaining power of buyers of customers, as well, is not helping them. Today’s customers have become more discerning (Davis, Kim, King, Larson, Redmond & Schick, 2008) in the light of the wider choice they have and the easier access to information that internet provides. This development constitutes a disadvantage for the US automobile industry – one that the players would have to deal with in the course of marketing their products.

Opportunities

The developed nature of the US automotive market provides a secure regulatory environment and protection for investors. Thus, the US automobile industry remains to be a lucrative investment hub for incoming industry players.

The public’s increasing consciousness regarding the need for clean environment triggers an increasing demand for cars with cleaner engine emissions. This serves as an avenue worth exploring, and most of the big players in the industry have already begun to tread along this new market lane.

Similarly, the increasing demand for vehicles powered by alternative sources like solar energy and electrical energy, as well as for cars with hybrid engines that require natural gas, ethanol, and vegetable oil ushers in additional opportunities for the US automobile industry players.

Simplification and communization, two related aspects of Design For Assembly (DFA) thinking, will provide the automakers a beneficial leverage by improving the productivity ratings of the auto manufacturers. (Find Articles website, 2008) These are operational innovations that are worth exploring for improved profitability of the industry players.

Threats

Recession and all its consequences like the reported decline in personal consumption from 4. 5% to 2. 9% (Davis, Kim, King, Larson, Redmond & Schick, 2008) paint a gloomy picture of the industry’s performance in the current year and the succeeding ones. Following a 2. 6% contraction in 2007, the US new vehicle market is going through a further slump this year. Sales from January to June 2008 decreased by 10% year-on-year, and analysts predict that the market will see no recovery until 2009. This view is bolstered by the fact that vehicle financing service providers are among the sectors badly hit by the credit crunch. (Bharatbook website)

Then there is the huge competition provided by the Japanese automakers (Davis, Kim, King, Larson, Redmond & Schick, 2008). Indeed, this constitutes a considerable threat for the US automobile industry, especially in light of the fact that it has no space for new entrants. Because there is a small demand base and wide choice available in the market (Davis, Kim, King, Larson, Redmond & Schick, 2008), the US automobile industry would turn out to be a real crowded arena if a new big player of foreign origin decides to embark on an expansion phase with US as the site in mind.

Also interesting US economy SWOT analysis

References

1. Find Articles. (2008). Assembly Plants: how they compare – Harbour Report on automobile assembly plant productivity. Retrieved December 22, 2008 from http://findarticles. com/p/articles/mi_m0FWH/is_n8_v109/ai_20855370/print.
2. Davis, M. , Kim, C. , King, A. , Larson, B. , Redmond, S. & Schick, A. (2008). Automobile Industry. Retrieved December 22, 2008 from http://www. authorstream. com/ Presentation/Goldye-61152-mobilanalysis-Automobile-Industry-Analysis-Major- Strengths-Ford-Motor-Company-a-Business-Finance-ppt-powerpoint/.
3. Bharat Book Bureau. (2008). Automotives Report United States. Retrieved December 22, 2008 from http://www. bharatbook. com/Market-Research-Reports/Automotives-Report-United- States. html.

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