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When one thinks about the UK motoring sector (or the same sector in any other national context, for that matter), one is inclined to think of the manufacture of cars. In other words, the UK motoring sector comprises the traditional industrial and skilled labor requirements to build a car that will last a reasonable period of time and provide a reasonable safety record in a reasonably fashionable chassis to please a reasonable number of customers. Manufacture of this type of car is, of course, an essential part of the British motoring sector, but it is not the only one.
The more inclusive definition that an economist might use is that the motoring sector comprises all of those industries that have a direct relationship to the manufacture of automobiles in addition to all those industries that have a direct connection to the maintenance as well as the disposal of automobiles. Some industries that have an indirect rather than a direct relationships may merit inclusion as well, although it is important (for the purposes of providing an accurate definition) not to stray too far down the chain of indirect connections to the point of reductio ad absurdum. It does not makes sense, for example, to include the manufacturer of eyeglass lenses as an industry connected to the motoring sector because some mechanics use them to perform their work.
We can expand the definition given above so that it provides a more complete sense of the motoring sector and the dynamics at work within this system. First it will be useful to define what we mean by an automobile within this context, because it is being defined here in broader terms than would usually be used. The motoring sector in this report includes cars (including taxis), light goods vehicles (LGV), heavy good vehicles (HGV), buses and coaches, and motorcycles.
Each of these types of vehicles (and the industries associated with them) exist in a web of social, economic, and environmental concerns and decisions so that any significant choice or change within these industries must be considered from each of these three perspectives as well as from the perspective of how each of these three underlying dynamics interact with each other. It is important to note that even after a vehicle has outlasted its use to the driving public, the car still physically exists. Thus one of the most important concerns in the motoring sector today from an environmental and social/cultural perspective (and in some cases from a personal perspective as well) is what becomes of the parts of a vehicle after it has been effectively decommissioned (Elgalhi, 2004).
The overall dynamics of this sector can be depicted in a sort of cradle-to-grave schema, in which each step in the process creates ripple effects that interact with all of the other stages (Jetin, 2003). The top of this pyramid can be seen as the manufacturing of vehicles, a point that we have already discussed. Almost equally important is the manufacturer of parts, related in turn to the research and development required to develop these parts (Elgalhi, 2004).This interchange between parts manufacture and overall manufacture embodies the dynamic between domestic manufacture (the cars themselves) and the internationally designed and manufactured parts. Because of increasing automation in the manufacture of cars (as in the manufacturing sector as a whole), the number of jobs in the motoring sector has been in decline for years (The Motor Industry, 2002).
However -- and most importantly this too reflects the overall market structure of the country -- there has been an increase of individuals in what may be called the service industry that is associated with the motoring sector. Across the First World, service industry jobs are rising as manufacturing jobs disappear. Often (and this is the case in the motoring industry) more jobs are created than are eliminated (The Motor Industry, 2002). In the UK, these ancillary jobs include working in the import of parts, selling and marketing of vehicles, and the repair of vehicles. While the increase of jobs in these areas are certainly welcome to the economy as a whole, they require different skills than are required by manufacturing skills, thus displacing older skilled laborers who may find themselves permanently redundant (The Motor Industry, 2002).
Finally, there is a new sector of industry that has arisen in the motoring sector only in the past few years: As public attitude and legislations have both shifted, there are increasingly numbers of jobs that obtain from ways in which vehicle parts can be safely recycled or disposed of in the most environmentally responsible way possible (Elgalhi, 2004).
Porter's Diamond Analysis of UK Motoring Sector
In our globalized world, competition must be assessed not only on a regional or even national level but on an international level. (Although it is also true that these smaller levels of competition must be considered as well.) Thus if we are to assess how competitive the British motoring sector is we must consider it within the context of the entire global system (Industry Topics, 2012). Other nations, of course, produce more cars than does the UK, so these must be assessed in terms of competitive success.
Even those nations that do not manufacture cars often manufacture parts used for cars, and so these nations must be considered as well when assessing why it is that the UK motoring sector has become and has remained so competitive both domestically and internationally. To analyse the ways in which the UK can successfully compete with other nations (many of which have lower wage systems than does the UK), the Porter Diamond analysis tool will be used because of its strength in analysing the ways in which a single sector (such as the motoring sector) can be compared across international borders (Porter, 1990).
This focus on the international status of a sector must be considered even in the case in which there is little direct important or export. (For example, few British vehicles are sold overseas.) The most important reason to consider an economic sector within the overall structure of that structure within the international context is that all of the players across the globe are effectively competitive. Each company is competing for customers across the world, a fact that becomes increasingly true with the ever-increasing importance of the cyberworld
Porter's basis for analysis takes into consideration the ways in which international competition and positioning affect the success and competitiveness of an industry (Porter's Diamond, 2002). His argument, however, focuses on the strength of the sector's home country (or national base) is the most essential single factor in determining the success of the sector (or particular company). Porter has devised a simple visual device to elucidate the ways in which that national base is predictive of success (Porter, 1990). These are firm strategy, factor conditions, demand conditions, related industry (Porter, 1996). The following provides an overview to how the system works:
Home demand conditions influence the shaping of particular factor conditions. They have impact on the pace and direction of innovation and product development. According to Porter, home demand is determined by three major characteristics: their mixture (the mix of customers needs and wants), their scope and growth rate, and the mechanisms that transmit domestic preferences to foreign markets.
Porter states that a country can achieve national advantages in an industry or market segment, if home demand provides clearer and earlier signals of demand trends to domestic suppliers than to foreign competitors. Normally, home markets have a much higher influence on an organization's ability to recognize customers' needs than foreign markets do. (Porter's Diamond, 2002).
Using Porter's model, it becomes clear why the UK motoring sector has built and maintains a position of international competitiveness. One way in which the sector has managed this is by having a well-defined and efficiently run supply system. The ability to do this is based on importing business strategies either from other countries or other industries, such as just-in-time supply strategy.
Overall, the UK motoring sector has been able to become and remain internationally competitive by becoming highly integrated:
The industry has developed a highly integrated industrial system that offers unprecedented value and accessibility to consumers worldwide through efficient logistics, massive scale, global trade, and sophisticated systems integration skills. Technological progress has seen dramatic improvements in vehicle safety, environmental impact, fuel economy, performance and comfort and versatility, while offering an ever increasing choice through model variety expansion (Holweg, 2009).
The above exemplifies some of the ways in which the sector addresses factor conditions and demand conditions. The sector has been able to create a demand by producing well-engineered vehicles that meet the current and upcoming needs and desires of its domestic customers as well as (perhaps) an increasing international market.
In a period in which vehicle customers are becoming ever more anxious to have access to environmentally responsible cars, this is precisely what the UK motoring sector is providing. This exemplifies not only the strategy of individual firms within the sector…[continue]
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