Term Paper on "Automobile the American Car Industry the Contemporaneous"

Term Paper 5 pages (1561 words) Sources: 5 Style: MLA

[EXCERPT] . . . .

Automobile

The American Car Industry

The contemporaneous world is characterized by a rapid pace of development in all sectors of life and business. In order to remain competitive, corporations have to be able to quickly adapt to the macroeconomic changes. The developments have such strong impacts upon companies that they can easily drive an international leader to bankruptcy and replace him with a better prepared and more adaptable competitor. This possibility threatens the American car industry who might soon get overthrown as international leader by their Asian competitors.

America's Big Three car manufacturers - Chrysler LLC, Ford Motor Company and General Motors - are threatened by their Asian competitors - Toyota Motor Corp, Nissan Motor Co and Honda Motor Co. Sales of American cars are still high, but they follow a decreasing trend. Industry analysts have pointed out that during the year 2006, General Motors and Toyota were at parity, but starting with the year 2007, Toyota takes the lead and maintains their position until 2017.

In these circumstances, the American automobile manufacturers feel an increasing pressure to adapt to the requirements on the market. As such, they need to follow the Asian producers' example and create better products. They must concentrate their innovations towards developing cars that meet customers' needs. Furthermore, considering the increased attention towards preserving nature and the surrounding environment, American manufacturers have to focus more on developing environment friendly cars. In addition, the new products have to reflect the international growth of the oil and petroleum prices and the cars have to be designed with engines than consume as little as possible.

2. Product Improvements

In the past, the American automobile producers made product improvements because they desired to do so. Their leading position was unchallenged and they manufactured better products in order to satisfy the needs of their existent customers and in order to attract new ones. However, with the growing pressure put on American manufacturers, they now increase the efforts to improve the products because they are obliged to do so. Otherwise said, the international pressure and the macroeconomic forces affect product improvements in the meaning that they impose them onto those who desire to remain competitive. If in the past product improvements represented the means to increase customer palette and satisfaction, today they are the necessity to maintain the market share. As such, if General Motors, Ford and the Chrysler division of Daimler Chrysler do not make significant efforts to improve their products, they might loose the international fight for supremacy in the detriment of the Japanese automobile manufacturers.

The current business world forces American car producers to focus their attention towards two major directions: satisfying the growing needs and demands of customers' and protecting the environment. The first category of improvements includes decreased engine size, decreased car weight, lower fuel consumption, increased comfort and a diverse list of requirements presented by various customers.

The second category of required improvements basically refers to finding ways to reduce fuel consumption and polluting car emissions. In order to meet these demands, American car manufacturers have to increase the fuel efficiency, increase the use of better emission control gadgets and implement stricter control standards on allowed car emissions. These improvements would better protect the environment as they would require less fuel, would consume less energy and would pollute less.

3. Fuel Efficiency

American consumers have long stated their need for fuel-efficient vehicles. They request these types of cars due to their less negative impact on the environment and also as they are cheaper to maintain and register higher mileages with lower amounts of fuel. But the American automobile manufactures somehow manage to neglect the population's demands and continue to produce trucks and sports utility vehicles. They hope that the massive cars will provide customers with increased comfort and a better sense of security. However, this is not what consumers desire.

The manufacturers' refusal to deliver the population with fuel-efficient cars does not come from their incapability to do so, but from their determination to become specialized in the SUV and trucks sector. The strategy adopted by manufacturers is that of perfecting one particular sector in the detriment of diversifying the product palette.

In all, customers have realized the benefits of an economy car on both themselves and the environment and they now require these types of cars. But the American producers do not focus much on delivering the items. The demand for fuel-efficiency engines is furthermore increased by foreign cars who present the desired features. A study conducted in 2006 and 2007 in regard to this matter has revealed that Japanese producers have developed significantly better vehicles that the American cars. The study revealed that American cars have an average gas mileage of 34.0 on the highway and of 27.5 in the city, while Japanese cars register average gas mileages of 40.6 on the highway and 36.3 in the city.

The chart below presents the fuel efficiency trend of American cars over the past 32 years. This was most prioritized by car producers in the late 1980s, after which the trend was a continually descendant one until 2005, when the interest in fuel efficiency became shyly present.

Costumer demands and the mass production of foreign fuel-efficiency cars pressure American automobile manufacturers to diversify their products. However the number of economy cars produced in the United States has grown, they are still insufficient in comparison to the actual demand. This forces consumers to direct their attention towards Japanese cars, leading to a decrease of the national automobile producers' sales revenues.

4. Loyalty to the National Product

The late 1950s and the 1960s represented the peak of the American automobile industry and customers' fidelity to the national brands was at its maximum. The car manufacturers were a significant part of the country's entire industry. In the mid 1990s, one out of seven citizens was employed in the automobile industry. Currently however, the Big Three are losing their appeal to customers and as such their role in the American industry. However they still register high numbers of customers, the sales trend is a continually descendant one.

Customers' loyalty to American producers is decreasing generally due to the clients' changing demands. These demands increase exponentially and companies are not always prepared to make a 180 degree switch and produce new items. For instance, the American industry is now focused on producing large cars, but the customers demand small and economic ones. Failing to receive what they ask for, customers purchase the cars from abroad, mainly from the Japanese competition.

A survey conducted in January 2007 revealed that 44% of the American population believed Japan to be the country that produced the best cars. United States was voted by only 29% of the population. The manufacturer to produce the highest quality cars was chosen Toyota, with 25%, followed by General Motors, with 21%.

However these answers point towards a low customer loyalty to American cars, hope is brought by customers' still high desire to purchase American vehicles. When asked if they preferred to buy American or foreign cars, 39% of the respondents chose America cars, 17% chose foreign cars and 44% stated it did not matter.

5. Conclusions

The American automobile industry is an important sector in the country's overall industry as it registers significant revenues and sustains other developing industries. But its position as international leader is highly threatened by the Japanese car manufacturers who use higher production technologies and focus on delivering products that better meet the macroeconomic demands.

The Detroit car industry is generally focused on specializing in the production of trucks and sport utility vehicles in an era when the population desires small size cars that consume less fuel and are more environment-friendly. The actions of the Big Three American car producers are influenced by the high… READ MORE

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