GLOBAL AUTOMOTIVE INDUSTRY
The global automotive industry maintains its status as a growing and profitable industry. According to a recent survey by “Strategy&”, the market of global automotive industry is uneven. So the competition to get into the right market is very intense. According to Forbes these three are the major players; Toyota, Audi and Volkswagen, which are battling for international market share. Toyota has the largest market share and is positioned number 8 on the list of 100 Best Global Brands. Forbes News suggests that Volkswagen and Audi are showing the greatest improvement and are positioned 31st and 43rd in the list of Best Global Brands. The competition among these brands in automotive industry to capture diverse markets is going to intensify in future.
Cultural Model classifies nations on the basis of three dimensions: Liner-Active, Reactive, Multi-active (Lewis, 2007). Linear active are people who are cool and calm. They take decisions based on data and plan ahead. Multi-active people are very emotional. They take impulsive decisions and do multi-tasking. They mix family and work. Reactive signifies the category of people who are respect oriented, accommodating and inclined toward compromise. Germany is an example of linear-active, Japan of reactive and Mexico is an example of Multi-active. The Multi-active culture is most appropriate for market for the products of Toyota. This is because Toyota is the best provider of mini vans. Multi-active people have large families and usually tend to take everybody out with them. So an affordable mini-van of Toyota provides the best alternative.
The economic best suits all three major competitors is capitalism. This is because these companies thrive on innovation. Capitalism provides the sort of competition and free market which allows for expenditure in R & D for innovation (Teece, 1996). A society in which capitalism will operate will have class differences. This is because the class which holds most of the capital will be the richest, and remaining will be the working class. But capitalism also helps increase competition among firms, so the society will get cheaper products as a result of competition. The quality of products will also increase because of competition. The international players will bring the best quality products from everywhere in the world for the customers. So capitalism will help in improving quality of life for any society.
Reasons for under-development
The economic development of countries that lag behind has been the result of wrong economic policies. Firstly, the countries which do not allow international competition and follow the policy of “protectionist” hamper their own economic growth. By protecting their industries from foreign competition monopoly sustains and innovation does not take place. So, the market remains primarily stagnant. Secondly, some countries economic development is hampered due to drainage of resources by foreign companies. For example in South Africa, international competitors drained all the resources and did not invest anything back in the country. Third reason for lagging in economic development is the lack of skilled labor and knowledge workers. This primarily means that lagging in education leads to failure in economic development.
3 initiatives for economic progress
The first thing the three major automotive industry players can do to facilitate the economic progress is to invest into the country, what they have earned from that country. It is not necessary that they do some CSR activity. It could be that they invest in expansion of their plant or distribution network. This way the drainage of resources will stop. Second thing which these companies can do is to help in development of human capital of those under developed countries. This can be done by investing in human capital, sharing knowledge and expertise. Toyota, Audi and Volkswagen can also initiate social initiatives to help society. For example countries of Africa face health problems. SO they can invest in the other businesses related to health in order to diversify.
Skills required at Global Leadership Position
If I were to join one these three major competitors, I would opt for Volkswagen. This is because they have a diversified product line which is capable for capturing diverse markets. As mentioned earlier they are also catching up on Toyota as a global leader. In order to rise up to global management level a lot of expertise and skill will be required. First of all, generally, business knowledge will be very important. Business knowledge means the understanding of the automotive industry and the market. Another very important factor will be cross-cultural management skills. Because Volkswagen operates in diverse environments with subsidiaries across the globe, it is very important to be able to manage global workforce. Bargaining skills are very important for negotiating new deals and making win-win decisions. Understanding of various cultures and language will be very important for reaching at global leadership position. This is because at top level decision need to be taken which relate to various cultures. So a sound understanding of each culture in important. Beside all this, other things which matter are, good communication skills, conflict management skills, strategic decision making. So there is a lot which needs to be done in order to reach the global leadership position.
Proposed Changes at Volkswagen: Structure & HR
First thing which I will change at Volkswagen is the divisional and region-centric structure. In such type of a structure knowledge of one region remains restricted. There is a lot of accumulated knowledge in one region which can be helpful in making sound decisions in other regions (Gupta & Govindarajan, 1991). So for this purpose this structure will be replaced by a product based structure. For each product there will be one management across the globe. This way the whole management of one product will be connected and the will share their experiences of that product. For example a failure of a feature in the product in India will be shared with the management of Mexico of the same product.
Apart from structure, another change which I will propose is the global mobility strategy of human capital. The HR should not be restricted in one nation. They should be mobilized from one place to another depending on the need of the firm. This will help Volkswagen operate as a truly global firm. It will help in talent acquisition and talent development in house. So these two changes will transform the structure and human capital of Volkswagen. These changes, along with many other will help Volkswagen to overtake Toyota in the coming decades.
The automotive industry is very profitable and still growing. Due to uneven market the competition is expected to intensify. The major players will compete in capturing the niche by modifying their products according to specific culture and by mobilizing their global talent.
Gupta, A. K., & Govindarajan, V. (1991). Knowledge flows and the structure of control within multinational corporations. Academy of management review,16(4), 768-792.
Price, M., & Lewis, M. (2007). The reinvention of cultural geography. Annals of the Association of American Geographers, 83(1), 1-17.
Teece, D. J. (1996). Firm organization, industrial structure, and technological innovation. Journal of Economic Behavior & Organization, 31(2), 193-224.