PESTLE Analysis
The industry of Automobile at present is flourishing industry. Cars are not only considered as the medium of communication but it is also considered as the part of lifestyle in several developed nations. With rise in price of gas, pollution, laws and taxes, it has created an effect on the development of automobile industry. Nevertheless, the technological innovations have paved way for future consumers.
The present report is about providing a detailed analysis regarding the specific issues and challenges that is faced by Ellesmere Port Motors. The report will conduct an analysis of business environment through models involving PESTLE. The report will also conduct a macro environment and micro environment factors along with the market structure based on the industry in which it operates. Later the economic factors affecting the Ellesmere Port Motors will be conducted as well. Finally, the effect of globalization that has had on the company will be analysed in the report as well.
The PESTLE analysis is regarded as an important component of conducting management studies. It allows the companies to take into account the external circumstances which may create an impact on the business (Perera, 2017). The PESTLE analysis conducted on Ellesmere Port Motors shows about those factors which can work in the development of this company. This analysis is helpful in making strategies so that it can resolve the potential harms.
Political Factors: The politics of UK has straight-forward effect on the business operations of Ellesmere Port Motors within its periphery. The political issues can however create an impact on Ellesmere Port Motors. In majority of the nations, government have already handed out rules concerning the production of automobile parts to make sure that safety of passengers is taken well care (Shtal et al., 2018). As Ellesmere Port Motors sources automobile parts from several brands and third-party suppliers across Europe, if any of its supplier companies is unable to meet these requirements, Ellesmere Port Motors licences might get cancelled. Consequently, Ellesmere Port Motors spends ample amount of time on test running prior to launch and this can be at times expensive for Ellesmere Port Motors.
Economic Factors: The income of people from stable and emerging economic zones are rising every day. Consequently, the spending capacity of Ellesmere Port Motors are also on rise. Therefore, this is the primary reason for increase in demand of Ellesmere Port Motors cars (Rastogi & Trivedi, 2016). However, it is noted that if price of automobile parts increases that is sourced by Ellesmere Port Motors from its third-parties, the cost its cars will increase as well. This may actually lead to decline in demand for automobiles as well.
Social Factors: The social trends intensely create an effect on Ellesmere Port Motors car productions. For Ellesmere Port Motors cars are not only just vehicles but it is also a fashion statement (Tan et al., 2016). Therefore, Ellesmere Port Motors takes into account the choice of people while producing new cars. The density of population also creates an impact on the sale of cars. A state that has dense population and large families tends to have much better sale of big cars such as SUVs.
Political Factors
Technological factors: The technological circumstances immensely create an effect on the overall sales of Ellesmere Port Motors. The industry of automobile is largely reliant on new technology so that it can make sure that safety of people is maintained. For Ellesmere Port Motors, it needs to upgrade its technologies to assure that cars are very much as safe (Alanzi, 2018). Ellesmere Port Motors also emphasizes on reducing the overall emissions and make use of modern technologies to keep the rate of emission under check.
Environmental Factors: The automobile segment can get effected severely due to ecological factors. Since there is a rising concern regarding pollution, this type of condition may create a toll on Ellesmere Port Motors business activities. Emissions from automobile vehicles is a matter of concern for environmentalists and also for government. Ellesmere Port Motors uses the latest technology so that it can produce electric cars or cars driven by battery. This will eventually help in reducing the pollution rate. The governments of European countries are very much willing to take up the environmental policies so that it can reduce the level of pollution and Ellesmere Port Motors being the automobile manufacturer is required to abide by the rules.
Legal Factors: The laws and regulations of countries can create an effect on the overall business of Ellesmere Port Motors. A large number of countries have already placed laws towards automobile companies (Singh et al., 2021). There are several European nations that have put in place strict laws to lower the number of vehicles on street and this can eventually help in reducing the degree of air pollution.
Figure 1: Figure showing PESTLE ANALYSIS
Source: (Alanzi, 2018)
The macro environment analysis is done for Ellesmere Port Motors to put forward some of the major factors that effects the industry. The analysis is done to reveal that political and technological forces are the driving force behind the industry progress.
At first huge emphasis has been placed by governments of numerous nations to create a balance amid their ecological and economic objectives in comparison to previous years. Secondly, the economic downturn is combined with employment that has resulted in fall of confidence among the consumers (Hudrasyah et al., 2019). Finally, the technological innovation has been very rapid and extensive during the last decade.
Abolition of replacement scheme: The most important determinant of the attractiveness of industry is the tax regulations on which it is operating. As understood from the circumstances of some nations there are differentiated tax structures for car industry that is mainly based on variables such as luxury or type of fuel. Tax is considered as the main source of revenue for any government and it is impact in the industry needs to be assessed in an accurate manner.
Furthermore, abolition of replacement schemes by some of the nations have further created an effect in the industry. For instance, moves made by nations such as Spain and France to terminate the scheme of car replacement has resulted in an upset of replacement cycle (Perrels, 2020). For Ellesmere Port Motors, this has immensely created a downward pressure on demand for the new cars. The governments have applied pressure to focus on greener cars.
Economic Factors
The government has placed much tighter regulations to implement control on emissions as evidence by the Euro norms. The companies which makes investment in cosmologies helps in making contributions to lower the emissions which will significant amount of competitive advantage. For Ellesmere Port Motors the aforementioned policies are considered as important force to keep account of at the time of creating strategies to enter in such type of markets, because they have significant effect on customer demand.
The technological forces are determined by government demands and policies. It is also driven by numerous manufacturing component. Ellesmere Port Motors believes that technology is turning out to be very sophisticated and this changes the whole value chain within the industry (Porras, 2018). The technological aspects are forcing Ellesmere Port Motors to develop strategic partnership with suppliers for effective and money-making competitive advantages.
Beside the macro environmental factors, there are some internal micro environmental factors of Ellesmere Port Motors which are considered accountable for marketing decisions of the company. These are as follows;
Supplier Power: Ellesmere Port Motors suppliers of raw materials such as assembled parts, aluminium, and steel have reasonable power (Ansoff et al., 2018). The rise in price of motor vehicle components sourced from third-parties have created a force on Ellesmere Port Motors to use cost-cutting strategies that exerts additional pressure on quality products suppliers.
Competitors: The industry in which Ellesmere Port Motors operates is faced with fierce competition and there are top players such as General Motors, Ford and Toyota. These companies produce wide variety of cars and also provide strong rivalry.
New Entrants: The new firms will find it very difficult to enter in an already crowded market which is led by automobile global giants (Henry, 2021). The new entrants will intellectual property, extensively strong network of distribution, satisfactorily meeting the government regulations and large amount of investment on research and development.
The automobile industry of UK is considered as the most important part of UK economy that worth much greater than £78.9 billion turnover and adds more than £15.3 billion to UK economy. The industry provides direct employment to some 180,000 people in manufacturing and more than 864,000 throughout the automobile industry (Hunger, 2020). The automobile industry accounts for 13% of UK export goods and have worth of £44 billion. The industry attracts investment of £3 billion every year in automotive R&D.
There are much more than 30 manufacturers that build in excess of 70 models of vehicles in UK. The industry is supported by 2,500 components providers and also it is supported by some of the world’s highly skilled engineers (Velikorossov et al., 2020). During the year 2019, more than 1.3 million cars were produced that included 78,270 commercial vehicles and more than 2.5 million engines were built in UK. Eight out of 10 cars that are manufactured in UK is exported to overseas nation to more than 160 different markets all through the world.
The growing disposable income is creating an effect on the automobile industry. As the general trend, consumers all through the world are earning more amount of money each year. This implies that the consumers have much more money to spend on the luxury items involving electronic and automobiles. The rise in demand for motor vehicles is not surprising but it is growing surely.
Social Factors
The market research has however shown that automotive industry in UK has experienced growth in commercial vehicle but it is now slowing down because of several factors (Lasserre, 2017). The market for passenger vehicles remains very good in UK. The CAGR for passenger’s vehicle is projected to be around 6.8% by 2023 whereas the new technology lower cost green car segment would experience a projected growth of 4.8%.
Besides this, there are several countries in Europe with which Ellesmere Port Motors has trade relations have levied taxes on items of luxury and this has contributed in rise in price. There are specific number of purchasers that might not choose to buy Ellesmere Port Motors cars. Consequently, this may result in decline in demand for luxury cars in some of Ellesmere Port Motors trading nations. Nevertheless, if Ellesmere Port Motors start launching their cars at much cheaper price, then it would get more number of buyers.
The automobile industry is impacted hugely by globalization. For Ellesmere Port Motors, globalization has re-shaped the business as well as manufacturing landscape of the company (Wheelen et al., 2017). Ellesmere Port Motors has made heavy investment in car manufacturing and it looks to capitalize on low cost of production by building vehicles that can be shipped to various third-party nations.
For Ellesmere Port Motors, the competitive cost advantage is considered as important fulcrum of globalization. With globalization the investment made by Ellesmere Port Motors in automobile manufacturing process has been on rise due to growth in motorization and partially due to manufacturing incentives that is initiated by government to promote newer technologies and localization of industry.
While globalization has also created a negative effect on Ellesmere Port Motors because of resultant financial crisis and decline in demand of cars in global market due to vast production overcapacity (Morden, 2016). The volatile price of raw materials and global automotive companies entering in a new market results in local and import policies playing both restrictive and enabling roles.
Conclusion:
Conclusively, since the economic circumstances and lifestyle of consumers in different nations are changing, the automobile companies such as Ellesmere Port Motors has the potential to witness a rapid growth in future years. Ellesmere Port Motors should consider both the safety and environmental concerns for sustainable stability. The analysis conducted above for Ellesmere Port Motors shows that company can successfully cushion its potential threats and can also expand its business both in developed as well as developing nations.
References:
Alanzi, S. (2018). PESTLE Analysis. Project Management.
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting strategic management. Springer.
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