The Automotive Industry

http-equiv="Content-Type" content="text/html;A recent example of this was in the Harley-Davidson
charset=utf-8"> INTRODUCTION:firm where early this year workers went on a two
The automotive industry is a worldwide industry thatweek strike demanding an increase in their wages, and
involves itself in the manufacture of motorcycles,especially a proportionate proportion of the profit
trucks, vans, buses and coaches. There are manymargin commission. On February 2, 2007, upon the
companies involved in this industry, including BMW,expiration of their union contract, about 2,700
general motors among others.employees at Harley-Davidson Inc.'s largest
In this section I will take a look at the motormanufacturing plant in York, PA went on strike after
cycle’s section of the motor industry.failing to agree on wages and health benefits.[1] During
The motor cycle industry has experienced worldwidethe period of the strike, the company refused to pay
growth in production, sales, and also profit margins forfor any portion of the striking employees' health
the past four years. Almost all industry players includingcare.[2]
Harley Davidson, Honda, Kawasaki, and Suzuki amongThe second dimension involves workers being paid
others recorded from modest to remarkable salesless or more depending on the factory location. In this
within this period of time.case due to cheaper labor in the third world and china
Shifts and price elasticity of supply and demandmany companies have relocated their factories to
The responsiveness of consumers to a price changethese economies so that they end up paying less to
is measured by a product’s price elasticity oftheir workers. This has prompted many workers
demand. Some products are highly responsive to priceespecially in Latin America to go on strikes regularly
changes while others are not. In some commoditiesdemanding equal pay with their equivalent workers
Modest price changes cause very large changes inbased in Europe and America.
the quantity purchased, Economists say that theThe third dimension involves different wages
demand for such products if relatively elastic or simplydepending on sectors. In this regard you might find that
elastic. For other products Substantial price changesa certain industry e.g. the motorcycle industry might
cause only small changes in the amount purchased,end up paying less to their workers as compared to
the demand for such products is relatively inelastic oranother sector like the banking sector.
simply inelastic.Monetary and fiscal policies:
In the view of the industry the industry products areIn order to promote the industry many governments
relatively inelastic; this is due to the fact that manyhave adopted different monetary and fiscal policies.
products in this industry are luxury goods. The productsThere is no single policy that has been adopted
have some kind of a ‘snob appeal’ and this isindustry wise. To improve the sector the South
why that even though the prices of products haveKorean government has encouraged the chaebols' to
been rising steadily demand has also increasedspecialize their operations in order to be more efficient.
relatively. A recent survey of the American marketIn addition the government has ensured that there
showed a statistic trend as the one below.exists a low interest rate to help the chaebols’
American market share is as follows:acquire loans cheaply. In other economies like Vietnam
Harley-Davidson 34.8%the fiscal policy involves deficit financing for the
Honda 23.7%industrial sector in order to maintain the booming
Suzuki 14.6%economy.
Kawasaki 13.6%Generally for the development of this sector there is
Yamaha 10.0%need to have an expansionary monetary policy regime
BMW 2.3%that should be compounded by a contractionary fiscal
Ducati .9%policy regardless of the geographical location of the
Moto Guzzi .1%specific firm.
The pie chart below represents this information.CONCLUSION:
To improve on market share every company uses itsThe automotive industry is a value adding sector in
own strategy. But in any industry there are four coreany economy. This means that the industry is very
elements of marketing strategy. These four elementsimportant for the growth of the economy. Thus its
are strategies that involve the product, pricing,economic importance lies both in its scale and
promotion, and distribution. All firms within the industrycomplexity of its direct and indirect interrelationship with
seem to employ a different mix of the four elementsother industries in the economy. The economy of a
in order to achieve its growth or industry projections.country and of the global village is of ultimate
Positive and negative externalities:importance to the growth of the industry.
An externality is ca cost or benefit borne out of anSince the industry produces non-basic goods (luxury
economic transaction to parties not directly involved ingoods) it is important that the disposable income arising
the transaction. In the motorcycle industry some of thefrom productive work in other sectors is sufficient to
positive externalities include an increase in technologicalallow for the public to purchase goods from this sector.
advancement not only in the industry but also in otherIn addition the size of the population and its purchasing
industries. Through increased inventions the technologypower is important to the development of the industry.
has become readily available and this has resulted inThe correlation of the industries e.g. how the other
cheaper products.industries supply the industry with raw materials or
In addition there has been a remarkable reduction inpurchase finished products from the firm goes a long
transportation costs, especially in china and India whereway in supporting the industry.
increased use of motorcycles and scooters inEconomic influences that can affect the industry in a
transportation has reduced traffic congestions as wellnegative way:
as reducing the public expenditure in transport.There are many economic situations that can
In the same context there has been an increase innegatively impact on the industry. These scenarios
negative externalities including smoke pollution, noisemay originate from the local economy of where the
pollution, and water pollution as a result of industrialfirm is located or it may arise from the global market. In
waste among others. Due to the increased pollution,the local economy, increased taxation of exports,
The American Motorcyclist Association (AMA) hasincreased interest rates, and changes in the political
announced that the review the Environmentalarena, an unprecedented appreciation or depreciation
Protection Agency "Letter of Guidance" on the issueof the local currency may all negatively hamper on the
of motorcycle-emissions rules has been completed.industry. In addition global depression of the world
The AMA had sought clarification of EPA regulationseconomy may hamper negatively on the development
for "kit" and "custom" motorcycles in use within theof the industry.
country. Under the regulations, a person will be allowedReferences:
only one kit motorcycle in their lifetime that will beDevelopment of Supporting Industries for Vietnam's...
exempt from meeting EPA emission requirements. Forretrieved on 3rd l 2007. Available at:
custom motorcycles, a manufacturer will be allowed toMankiw, N. G. (2004), Principles of economics (3rd Ed.),
create and sell up to 24 bikes a year that don't meetChicago, ILLIOIS: Thomson South-Western
EPA emission requirements. In addition these bikes willPhilip Hardwick (1982), an Introduction to Modern
be specifically labeled that they are exempt, and theseEconomics, Longman, U.Khai Industrial Strategy: An
bikes will be show bikes that will be rarely ridden.Overview, retrieved on 3rd l 2007. Available at:
Wage inequality:[1] Strike shuts down Harley-Davidson plant, Company
Just like in many other industries the motorcyclesuspends production of motorcycles amid contract
industry is faced with the problem of wage inequalities.dispute," U.S. Business, (Associated Press, Feb. 2,
These inequalities have three dimensions. The first2007)
dimension involves different wages for workers in the[2] Striking Harley workers take hits in the pocketbook,"
same firm, e.g. the managers of a certain firm may beThe York Dispatch (Feb. 12, 2007).
paid more than the engineers in the same firm.