Group1 Square
Name: Hung Ming Yeung
SID:53072979
The car industry
Create new demand by
technology development
Car industry has been existed for a long time. Years and years ago
human are looking for a transportation tool which is fast and reliable. From the
animal-powered streetcar to the car we are
driving now, it is no wonder that the technology applied on the transportation
tool improved a lot.
Before we start to talk about how the car industry changes their way to
engage the global business and generate new demand, we need to know what globalization
is and how it affects the business. According to the “Globalization of markets,
marketing ethics and social responsibility” written by Recep YÜCEL,Ph. D and Osman
DAĞDELEN,Ph. D. globalization mean the world is more integrated and it can
reveal in many dimension. One of the driving forces of globalization is the technology
which applied to the transportation. (1)The
improvement in the transportation helps to integrate different part of the
world with fewer time and more convenient. Car, as a major transportation tool
has involves in this process a lot. However, how the car industry involve in
this trend that they have contributed?
Historical perspective
The
Globalization brings a lot of opportunity for the company involves, however it
also bring a stiffer competition for the company around the world. More and
more company enters the domestics market of different country, the company originally
inside the local market must work harder to deal with the competition. The
response of how car industry engages in globalization change significantly.
Global Selling
In the past, the car
industry creates demand via exploring the new market, like the market in India
and China. This kind of country has a large demand as they are developing
faster and faster. The people living in these countries have higher and higher
income due to the economic development. Until today, the cars requirement
inside these two countries is still growing. We can take the number of car in China
as an example. According to Modeling Private Car Ownership in China, the car increased
22.48% annually at the national level from 1990s to 2005. In 1985, only 285,000
private cars in China are on the road. Until end of 2005, the number had
reached 18.5 million. (2) The market
in these kinds of developing country has a great potential. It is no wonder
that most of the company in the car industry has placed their focus on these
markets. This trend seems to be continuous. According to the World-bank
analysis, the global middle car will increase from 430 million in 2000 to 1.2
billion in 2030, which mainly come from India and China. (3)
Global
production
In the past, the car industry focus on cutting cost of production by
global sourcing and global manufacturing. The transportation technology improvement
has greatly reduced the time and cost to shift a product. This makes global
production become possible. The car industry can put their factory into a place
with lower rental cost or salary, even the transportation increase, it is still
profitable. Also, the global production can reduce the production cost via fulfilling
the domestics market for the car. The supply chain efficiency can be greatly
improved. With a lower cost, they can be more flexible to adjust the selling
price to create the demand.
Just take BMW as an example; they have started to cooperate with a
local company in China to set up a company in-charge for manufacturing in the China
in order to lower the cost of production since May 2003, which is called the
BMW Brilliance. The factory
in northeastern Chinese city of Shenyang makes 3 and 5 series and X1. (4) This factory will produce the BMW car that sells inside the China;
this can reduce the transportation cost and the luxury import tax for the
import car. (5) This can help the
BMW to earn more profit in the China market. The price for the car produced in
China will be sold cheaper than the car import. This provides the price incentive
to attract more customer and thus creating demand. Also, in 2011, the BMW Brilliance
start to export the BMW car produced in China, which starts from BMW series 5
Li. (6)
Reason behind
The
global environment from different aspect has contributed a lot on this. For the
political environment, the establishment of WTO helps to reduce the tariff of
different country. There have nearly no trading barrier in USA, Euro, Japan. (7)The trading barrier disappear which
make the global market and production possible. AS the price for import
products can consider the transportation cost only without any tariff cost to
pay, the price for import product will be competitive as local products. The
free trade condition allows the global product to enter different market and
compete with the domestic product. Also, it allows the producer to move the
factory with lower transportation and manufacturing cost. The emergence of different new
market provides a lot of new opportunity to explore the selling and place for
production. This motivates the car industry to create new demand via global
production to reduce the cost and entering the global market.
The economics environment also
contributed. The economics environment of the developing country like China
improved a lot start from the late 20th century. The people have a
larger demand on the car as they become richer. This provides a great
opportunity for the car industry to sell the car. The demand just grown by it
selves since you enter this market. As we have mentioned in the upper part,
just take China as an example. The number of car in China increase
significantly since last decade.
Current engagement
In
above part, the ways that car industry uses to create the demand involve the
change of industry model and reorganize intentionally. The industry has spent a
lot of effort on reducing the cost and entering the new market. If the market
becomes saturated, the car industry needs to repeat the whole process again.
This will be an endless process and finally one day all market will be
saturated. The number of matured market will keep increasing. The company in
the industry needs to focus on how to generate a new demand within the existing
market. They need to explore more the existing market in order to keep the fast
growing of the car industry. Also, the change in the paradigm also contributes
to this process. I will further explain in the following part.
Another factor that leads to this change will be the request from
customer. Car industry needs to consider how to fulfil the demand for latest
technology to apply to the car from the global customer. I will further explain
in the following part.
Nowadays, the company involve in car industry has spent a lot more
effort on investigating the technology that can applied on the car like
Auto-driving, Electricity car. The technology enhancement can help the car
industry to create demand in two directions.
1. Creating a
new trend to create a new market via developing the electricity car, Car that
can drive on the sea…
2. Explore the
demand from the current market like developing the car GPS, touch
-screen control,
auto driving…
Creating a new trend
Just use BMW as an example, they have launched two types of electricity
car and one of them has been available on the market, the i3. The i3 is an
electricity car which does not require to uses oil as energy. According to the
BMW website, there are two models BMW is going to launch in electricity car
market. (8) The market of electricity
is really large. It has started to create a new trend due to the concept of
green car. Different car companies have also launch their electricity car model
like Tesla, Nissan. (9)
The technology enhancement brings a new demand to the car industry.
For example, the green car idea can attract those customers who concern about
the environment of Earth. The demand created is not restricted to any local
market, but globally exploring market. This is not just talking about the
marketing strategy to increase the sales, use the car of their company to
penetrate the local market. This is creating a revolution in the car industry
and it might create a new market for those who participate. It also produce a
new market which other car company outside this market unable to serve at the
short time.
Explore the demand from the current
market
The equipment
of car has changed a lot. The equipment which has been considered impossible
became basic equipment in a car in one decade. Just take the touch screen as an
example. The GTR by Nissan is a famous series. The generation of R34 end in
2002 and R35 release in 2007 has also become the treasure from the perspective
of “car guys”. One of the differences is the R35 launched with a touch screen
controller. (10) In the year of the
production of R34, you may not image a touch screen inside the car. Maybe you
will not even image the existence of touch screen. However, touch screen become
basic equipment in the new car produced.
This help to explore the existing market via
attracting the existing customer to change the old car. The latest technology
equipment of car can attract those old car owners to change their car with
better equipment. The suitable new technology can attract the customer and
become the necessary equipment on the car.
Reason
More enhancements on the technology applied
on the car can help to create the barrier for the industry. The globalization
helps different company to enter the market on other country. However, this
also provides chances for other company to enter your market. What make creating the new trend via technology enhancement become
attractive? It is different from other. The technology enhancement can create a
new trend in the market, and it take a lot of cost to overcome the technology
barrier in order to catch up with the new trend. Unlike the other new trend
like the low-price luxury, the new trend cause by technology enhancement cannot
be follow easily. This helps the company which has become the pioneer, to get a
larger market share. The great profitability has encouraged the company to do
so.
The policy also helps to encourage these trends, especially for the
electricity car. The government has encouraged the green car by reducing the
tax. Just take Hong Kong as an example, the first registration tax for the
electricity car is lower than the normal car. (11) This help to encourage the development of electricity car as
the demand will be increase due to this kind of policy.
However, I think one of the major reasons for technology enhancement to
become major type for car industry to engage is the request from customer
perspective. (12) The customer
requirement change rapidly. Data analytics is an important tool in uncovering
and rapidly responding to changing customer needs. (13) The customer is requesting latest technologies to apply to
their car. In the research done by Accenture, respondent from 7 regions including U.S,
France, Italy, China, Malaysia, South Korea and
Brazil agrees that they want to include
different new technology to apply in their car, especially
for the in-vehicle infotainment (IVI). (14) This is a clear message that delivers to the car industry. The
customer from different country wants to have more technology enhancement in
their car. This makes the company in the car industry to respond with the
requirement from customer. If you can respond the demand of customer
successfully, you can create a lot of new demand for your company. It is no
wonder that more and more company are keen to develop the technology
enhancement applied to car, in order to create a new trend to attract customer,
and gain competitive advantage from your competitor. More and more people are
not only considering the appearance the car, but also the technology part of
the car.
Car, as a technology product to improve our living, is no wonder that
people request continuous development to fulfil what they want. The car
industry needs to respond to what customer need, which need to technology
enhancement of the car product.
The
political, economic environment and the customer request make the car industry
shift their way to create market from old way to technology enhancement.
Global and international context
The globalization has affected a
lot. Most of the effect by globalization has been analyzed in the upper part. We
know the political environment and economics environment of the global has
affected a lot. The globalization of has affected the development of the
industry, not only the car industry, but also other business that operate
globally. This help the transaction between different country become more frequent
and being encouraged due to the fewer cost.
One of the popular methods is entering the
emerging market and gain as much as market share in this kind of market. One of
the famous examples is BRICS. These kinds of market have
a great potential in the demand to car.
However, when the time pass, it will be more difficult to keep the
growing rate as the demand will not grow un-limit. Also, under the effect of
globalization, more and more competitor from different country will enter the
market and intense the competition. This pushes the participant in car industry
to differentiate their products and create an entry barrier to limit the
increasing competition.
Also, the request for the latest technology applied to the car come
from global. The culture become single under the globalization which also make the
requirement on the technology become popular in all market. “The technology
culture” As different markets has similar culture under globalization and share
similar value; we can call it the global culture (15). Of course the rise of global
culture doesn't equal to consumers share the same values. (16) However, more and more people has affected by the global
culture. It is no wonder that they will share similar perception or affected
similarly on some issue like what they want for the future car. The requirement
for the latest technology applied on the car come from the global market and
the Car industry need to respond with it. The company which can fulfil the
requirement can gain more market share globally. According to the research done
by Accenture, they have conducted a survey on 7 regions including U.S, France,
Italy, China, Malaysia,
South Korea and
Brazil. The majority of the respondent agrees
that they want to include different new technology to apply in their car. (12) The global request from the customer contributes to this
shifting.
Paradigm shift
In the past, people do not sense that the oil
is the limited resource. With the time past, more and more people find out the
oil is not a renewable energy and they are looking for a replacement for all
stuff that using the oil. People can see the end of oil in this century. (17) The paradigm shift toward
renewable energy affects a lot. This paradigm shift leads to change in car
industry to gain new market. The technology enhancement to develop a new car with
the use of electricity will become necessary. Otherwise, the company may need
to shut down when no more oil is available.
The second paradigm shift is how people rely
on the technology in daily life. In 21 century, people are heavily relying on
the technology in daily life. They want to make every stuffs to become more
high-tech which contain more function. The car is one of the major tools that
people facing every day. In the past, people bring the children to play in the
park. Nowadays, people give the children an i-Pad. The technology enhancement
involve in every angle of our life. No exception for car. According to article
posted in the industry week, the car company focuses more on latest consumer technology news. This is because the car
design is becoming more focused on not just how the next model looks, but how
much of the latest technology can be packed into. (12) People are asking for more technology applied to the car. This
paradigm shift on the technology is one of the major factors that lead to the
shifting from the historical way to create demand into a new way, the
technology enhancement on the car.
This shifting is
affected every industry. For example, the phone industry has been affected a
lot. The smart phone has definitely beats the traditional phone. This condition
can be referred by the car industry. The car with no lower technology level
will be kicked out from the market.
Future trends and directions
The future new ways to create
demand will be further development of the technology applied on the car. This
can change the whole industry and you can become the pioneer if you successfully
develop a product which fit the people need.
For the short trend, Accenture surveyed 7,000 drivers in
seven countries, 91 percent want to use is a lane-changing/blind-spot warning
system. 83 percent of respondents like to have technologies that can
automatically contact a car recovery organization when their car breaks down,
and 75 percent want a system that automatically calls the nearest emergency
center if a crash were to occur. The car industry can consider these opinions
and make it practical in the car.
For the long trend, the future
trend should be the multifunction of car. The car development is basically
following this trend, develop the car that can afford more function for
transport and adapt to different condition. We have developed the Jeep, SUV and
even the car that can drive on the sea. What is the next? I believe this will
be the flying car.
The movie can greatly reveal different idea of human toward the car,
especially for the movie like James Bond. The car Lotus can change to a
submarine in the “The Spy Who Loved Me” (18).
In 2008, Rinspeed concept car called sQuba is launched. This is the
world’s first car that can be driven both on land and underwater.(19) Also, the James bond can control the car BMW7
Li by his mobile phone in “Tomorrow never die” (20). This function has been launched in the recent, by an apps
call i-Drive. (21)
However, this kind of application has not become popular in the market. The demand for this kind of technology
is limited. However, for the flying car, this will be huge demand.
The number of car has been
increased significantly during the recent year while the relate infrastructure
like road network cannot enhance in the same peace. Different big city around the world are facing
a serious traffic jam problem. We can take China as an example. In 1985, only 285,000 private cars in China are on the road. Until end
of 2005, the number had reached 18.5 million. (2) There are different ways to solve this
problem. First, reduce the number of car. From the car industry side, this is
not a good idea. Second, build more highway and road for the car to drive on
it. However, the area of the land is limited; we cannot build more and more
road forever. How about turning the road into a “3-dimension” way. To make the
road available for the same are but different height. More cars can be driving
on the same area.
This can solve the traffic jam
problem easily. However, we need to make it cheaper as we might need to apply
the technology which applied in the helicopter or British
Aerospace Harrier
II which can vertical takeoff. The price for these kinds of technology is
expensive. It takes time for mature development and low down of the price
before we put it into car.
Impacts on and costs of consumerism
According
to week 7 reading about the consumerism, consumerism is a kind of belief that your
personal well-being and happiness depends to a large extent on the level of your
personal consumption, particularly on the purchase of goods. (22) The technology enhancement happen
on the car has a large effect to consumerism.
Impact on consumerism
The enhancement of technology basically
brings a new generation to the car industry. Consumer are not only considering
the appearance to buy car, but also considering the technology equipment. (14) The problem is, the peace for
technology enhancement is really rapid.
(23) When the people start to chase on the technology part of the car, the more
rapid change of the car they own. This has accelerated the consumerism, as more
and more people want to chase for the latest model of the car. However, this
might not what they really want or need. They might just want to get the latest
model and go to show off, rather than make use of the latest version of the
technology equipment. More and more people buy luxury to protect their self-esteem
and show off, the car with latest technology equipment is one of the things
they will buy to show off. This represents the power and social status of them.
This links to the problem of identity. I will further explain in lower part.
Cost of consumerism
The
cost of consumerism becomes higher. The technology enhancement in the car
industry has enhanced the consumerism.
Society
The society of human become more relate to
material. Most of the people start to become the slave of material and non-stop
chasing for the latest products. Also, this might change the living style of
human. If everyone considers car is a product which is useful, the public transport
will be gradual erosion. As under consumerism, people are encouraged to buy the
things they want rather the things they necessary need.
Culture
The culture has basically shifted to “money can buy everything” due
to consumerism. When the technology is developed more and more rapidly, there
is tons of new equipment that help to improve our life. However the cost for
enjoying the latest technology is usually high. This give out the sense of
better life need more money.
Another culture is the culture of borrowing money to buy things. Consumerism
fosters desires to consume things right now. People can easily borrow money to
buy things now and pay back the loans over a long period of time. (22) The technology enhancement make
the change of car more rapid and more people is going to lend the car loan to
change their car, which is not necessary in their life.
Individual identity
Under the
globalization, the personal identity increasing impacted. (24) Not only the globalization itself changes the identity, it
also facilitates other factors that change identity. The consumerism has
changed the way that people gain identity. The social media turn the people to
gain identity mainly via external way. More and more people are asking
questions about “how other people look at me?” The identity is now gained from external way. (25)
Getting one of the cars with latest technology equipment with let
other people to judge your social status via your car, especially more and more
people consider this factor of car. The focus on technology enhancement has
made the technology part become more and more important in every angle. This
give the people the sense that “I am fashion enough” “I am wealthy” via getting
the stuff with latest technology. The consumerism has given the teenager a
wrong way to gain identities, which lead to a wrong direction for people to
make use of technology enhancement. The people will focus on the pleasure on
getting these stuff instead of enjoying the enhancement and improvement brought
by technology.
Argument among the technology enhancement
Some may argue that car-free living will become possible and it will a
good way to reduce the pollution rather making the car less polluted. It is
useless for the technology improvement on reducing the pollution brought by the
car. (26) I cannot agree with this
viewpoint. What they are suggesting is a natural life. We can live without car.
We cannot deny the contribution of the car in the enhancement or our
living standard. What we need is buy and use of car wisely instead of abandon
all the car. It is no doubt that the car has improved our life and having a
important role in our life. Without car, the transportation will become slower;
the globalization process will be reduced. The exchange of good between
different places becomes slower.
A better way to do this is focusing on
education and the technology enhancement. One day, there will have cars using
the renewable energy and auto driving. Auto driving can reduce the behavior
that cause more fuel consumption made by driver.
Reference
1.
Week 3 reading
Globalization of markets, marketing ethics and social responsibility
The University of Kirikkale, Faculty of Economics and
Business Administration,
Recep YÜCEL, Assistant Professor Department of
Management, Osman DAĞDELEN, Ph. D. The University of Ahmet Yesevi, Faculty of
Economics
Country Ph. D. Instructor Country
2.
Modeling Private Car Ownership
in China Investigation of Urban Form Impact Across Megacities Jieping Li, Joan
L. Walker, Sumeeta Srinivasan, and William P. Anderson , 2010
3.
BMW: China is "the
ultimate sales-driving machine"
4.
Official
website of BMW Brillance
5.
CHINA: First locally-built BMWs
on sale this weekend – report by 16
Oct,2003
6.
Official
website of BMW Brillance
7.
BETWEEN
GLOBALIZATION AND REGIONALIZATION:
WHAT IS THE FUTURE OF THE AUTOMOBILE
INDUSTRY? *
Michel Freyssenet and Yannick Lung
GERPISA international network
* Chapter to be published in Global
Strategies and Local Realities: The Auto Industry
in Emerging Markets, edited by John
Humphrey, Yveline Lecler and Mario Salerno (to be published by Macmillan,
Winter 1999-2000).
8.
BMW HK
website
9.
Toyota and Nissan choose
different green-car paths
June 22, 2014
10. Nissan USA website
11. Hong Kong Government Website
12. Consumer Technology Forces
Carmakers To Satisfy Demand, Not Create It by James Robbins, Accenture by Jan 2012
13. Week 9 reading
CHOOSING THE RIGHT CUSTOMER The First Step in a Winning
Strategy
by Robert Simons, 2010
14. Accenture research
Consumers Want Cars Equipped With More Safety
Devices and Technology That Offers Driver Assistance and Advanced
Communications, Accenture Study Shows
January
09, 2012
15.
Week 12
Reading
The Psychology of Globalization
Jeffrey Jensen Arnett
University Park, Maryland
October 2002 ● American
Psychologist
16. Week 5 reading
How Global Brands Compete by Douglas B. Holt, John A.
Quelch, and Earl LTaylor
September 2004
17. Paradigm shift gives new momentum to electric cars
By Malachy Tuohy
Published: Sunday, October 26, 2008
18. James bond movie in youtube
(start from 2:30)
20. James bond movie in youtube
(start from 0:10)
21. i-Drive introduction video in youtube
22. Week 7 reading
Chapter 7
Consumerism
Final draft August 2009
23. Technology & Identity
Is rapidly accelerating technology eroding our sense of who we are?
Is rapidly accelerating technology eroding our sense of who we are?
By Barbara Molony
24. Week 12 optional reading
Self,
Identity, and Globalization in Times of Uncertainty: A Dialogical Analysis
Hubert J.
M. Hermans Radboud University and Giancarlo Dimaggio Terzo Centro di Psicoterapia
Cognitiva, 2007
25. Technology: Is Technology Stealing Our (Self)
Identities?
Who or
what is defining your self-identity?
26. Sierra Club's Electric
Cars: Is It Time for More Technology or Culture Change? By Jan Lundberg 13 April, 2012
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