Executive Summary

Sometimes, the dynamics of external market imply the need for a gradual shift in an organization’s strategy. This can be linked to the changing customer perception, economic turbulence and evolution of competitors for the fierce battle of market share. In Australia, one of the premier car manufacturer saw a downfall in their business in Australia if they continued with the flawed strategy, despite seeing the signs of a change in market dynamics and ignoring them.

In this study, we understand the factors influencing one of the major Australian car manufacturer, Holden, to move its production units outside of Australia. The factors include issues that cater to external market as well as company’s strategy which led to its ouster from Australia. We will also briefly touch upon the impact this move had on the company as well as Australian market.

ContentsExecutive Summary.....................................................................................................................................1

Introduction.................................................................................................................................................2

Body............................................................................................................................................................3

External factors:......................................................................................................................................3

Internal Factors:......................................................................................................................................3

Stakeholders:...........................................................................................................................................4

Conclusion...................................................................................................................................................4

References:..................................................................................................................................................4

Introduction

The automotive industry in Australia has been self-sustained for years, and has contributed immensely in the country’s economic growth. Locally manufactured cars have the entire value chain established inside Australia, thus creating a huge number of employment opportunities in manufacturing and production sector. For close to 5 decades, companies like Holden and Ford retained their high market shares. Government of Australia played a very important part in boosting the sale of local cars by its policies of high tariff barrier for import, and subsidizing the manufacturing industry. Car makers enjoyed these privileges without having to worry much about improving their offerings to survive in the market. This resulted in a lack of competition, which combined with high labor ensured that Australian cars were always much costlier than the cars made in other countries. (Productivity Commission 2014).

In 1980s, the new government regulated the tariff barriers which led to an increase in car imports. This was the first sign for Holden and co. to reevaluate their performance and improve their strategies, so as to be able to counter the competition and thrive. But their ignorance of these signs led to a loss of market shares, owing to the fact that now the people of Australia had many better options of cars to choose from. The decreasing demand resulted in loss of jobs and destabilization of the automotive

ecosystem in Australia. This loss of market share started affecting the entire manufacturing sector as the decline in demand was followed by global financial crisis which reduced the exports to a minimal level. This left the industry with a huge number of job cuts and unemployment issues, as the imports have gone up. Cars made in other countries with cheap labor and strategically and technologically enhanced companies started to flourish in the Australian market. (Brain, 2013).

For a number of years, the government then in power assisted the manufacturing sector with direct financial benefits. But With time, the new government started realizing that privileges given to Auto manufacturing sector were a hindrance in the path of development of other sectors. This led to some harsh decisions. And now, major players like Holden and Ford have already announced their exit form Australian market, and thus tough times looms ahead for the entire car manufacturing supply chain and all the people associated with it.

Body

There are various aspects of the situation which saw Holden announce their exit from Australian market and causing a huge destabilization in terms of jobs in manufacturing sector. Let us understand the scenario from different perspectives.

External factors:

Changing market dynamics: The car market outside Australia has been rapidly changing with the evolution of technology and changing customer needs. The external made cars had more features for lesser price than the Australian made cars. With the rise of imports, Holden and co. found it difficult to compete with these external players, and thus lost their market share.

Government Aid: The governments and political aspects of the market had much to do with the entire situation. The manufacturing sector was heavily dependent on the government facilities and subsidies. Over the years government supported the manufacturing sector as it had provided a large number of jobs. Once the aid was stopped, Holden and co. were no longer capable of surviving in tough competitive market conditions in Australia.

Import/Export tariffs: For decades, the high import barriers ensured that there was no threat of any new entrant to Holden and co. Which allowed them to monopolize the market and sell cars at high price. But with import barriers reduced, competition increased. Also export barriers increased which further dented the prospects of monetizing.

Internal Factors:

Non Responsive Strategy: For a long time, Holden did not keep track of the developments in the external markets and thus took no efforts in revamping their strategy to match with the market standards. High cost and less features could not hold their position in the competition once import tariffs were lowered.

Lack of critical reflection: Critical reflection is a continuous assessment of one’s own performance, and involves analysis and taking corrective measures. Holden did not realize the importance of reflection, and thus could never improve.

Over dependence on government aid: Government of Australia provided support to the manufacturing industry for a long time. But the players like Holden and ford took this help for granted and never prepared for the time when the help will be withdrawn. A clear lack of long sightedness resulted in their ouster from Australian market and loss oj employment opportunities.

Stakeholders:There are a number of stakeholders involved in the entire value chain. All of these stakeholders are affected by the movement of manufacturing activities of Holden out of Australia. Let us discuss these stakeholders one by one.

Workers and suppliers: The fate of Small and medium scale Auto suppliers and the workers associated with the manufacturing units, has always depended on the mercy of government policies and multinational company strategies. Loss of employment and reduced wages will impact their living.

People of Australia: Deprived of choices in car segment for many years, people of Australia now have many imported cars in market which give more features for a lesser price.

Car Manufacturers: Holden, Ford and other manufacturers, having already lost the market position and share, will be greatly impacted by this decision of moving their manufacturing units out of Australia.

Australian economy: The crash of manufacturing sector is eminent after the ouster of holden and co. This will have a great impact on the revenues and GDP, thus destabliazing the economy to a great extent.

Despite all these factors, there are a number of suppliers and manufacturing workers who had foreseen the fate of companies like Holden. Their market awareness allowed them to enhance their skillset and look for alternative employment opportunities, which helped them to survive through this debacle. Thus, proper strategy and critical reflection helped these workers to retain their employment.

ConclusionWith the rapidly changing dynamics of the market and increasing globalization, it becomes imperative for an organization to act according to the Political, Economical, Social and sometimes even technological and competitive factors in the country it has been operating in and the countries it plans to expand its operations. Holden required a farsightedness and preparedness to battle the odds and thus owing to the changing political scenarios and the market it had to decide moving its operations outside Australia.

I it still wants to resume its operations in Australia and not depend on the Government’s funding, Holden needs to clearly find out the exact factors responsible to provide a competitive and sustainable advantage to the company as well as positively retain the employment of its labor force in Australia.

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