THE CASE OF HOLDEN

THE CASE OF HOLDEN

Instructions:

Table of Contents

1. Executive Summary…………………………………………………………………. 3
2. Introduction…………………………………………………………………. ………4
3. Scope: …………………………………………………………………………………4 3.1.  Industry Overview……………………………………………………………4
   1. Organizational Overview…………………………………………………….4
4. Body

4.1. External Environment and Business Perspectives……………………………5

4.2. Critical Reflection in Managerial Foresight…………………………………6

4.3. Innovative Thinking and Entrepreneurial Orientation……………………….7

5. Conclusion………………………………………………………………………………8

Executive Summary 

The government of Australia funds  $500 million dollars each year towards the automobile manufacturing industry. Research suggests that the automotive industry in Australia faces uncertainties. Nevertheless, in the present day, Australia manufactures approximately 230,000 motor vehicles. Economists around the country have concluded that the automotive industry in Australia solely depends on the economies of scale and its principal significance to achieve cost competitiveness. However, the major bottleneck that faces the industry is the current volume that is extremely disappointing. To be profitable, the industry has invested in projects to employing enhanced technology towards the car manufacturing process through the use of advanced robotics. As the Australian dollar rise in the exchange rates, the industry is suffering from competitive burden regarding low-priced imports and export competitiveness. Also, with some strict protectionist policies in major export destinations that stand to pose a risk to the export sector of the car manufacturing industry in Australia. A good example is the recent Free Trade Agreement with Thailand, where the Thai Government has imposed a non-duty tariff, making the territory’s price in Thailand extremely unattractive for business.

Introduction

In the case of Holden, it is important to review individual business perspectives in the industry. Therefore, this paper transcends a review how Holden Company, as a car manufacturing sector, employs its business aspects. Also, it will focus on the environmental factors that Holden Company need take into consideration and outline critical reflections to improve its managerial foresight so as to tackle their problems and also the significant need for innovative solutions to the problems encountered by Holden Company.

Scope

Industry Overview

The very first car manufacturing industry in Australia was the Ford Motor Company. However, Holden, A subsidiary of General Motors, was accredited for mass production of Australian designed vehicles. By the year 2005, the number of cars manufactured in Australia had hit 4.5 million. Australia car manufacturers have always preserved authenticity in design, where they are they are known for producing large-sized passenger automobiles. However, reports Suggest that the total number of cars produced by the year 2009 reduced down to 175,000. Additionally, most of the cars in Australia are exported to Europe and Asia. The industry comprises of three manufacturers of cars namely; Holden, Toyota, and Ford. Both companies recently have announced that they will cease producing automobiles. Holden and Toyota have stipulated that they will stop producing at the end of 2017 and Ford has tabled its cessation at the end of October 2016 (AUDIIS, 2016). Therefore, in the coming years, Australia will not have a car manufacturing industry.

Organization Overview

 Holden company was launched first as a saddler company in the South Australia territory. Currently is one of the seven branches of fully integrated global GM operations that designs, builds, and sells automobiles across the world. The headquarter of Holden Company is in Port Melbourne, Victoria with the engine-manufacturing site at Adelaide, South Australia. Holden vehicle operations initiated production of close to forty-four and derived six body styles and two architectural design.  The company produces the Commodore range of Sports Wagon, Ute and sedans together with Caprice luxury vehicles in the country’s market. Holden company, as one of the nine global designers to GM, they are responsible for the production of vehicles such as Chevrolet, Commodore, and Camaro (Holden Company, 2016). 

Body

External Environment and Business Perspectives

Automobile companies in Australia are faced with environmental issues that are tough for them to continue producing cars in Australia. In support of decisions made by both the three manufacturing industries in the country, it is necessary to conduct extensive research on the possible environmental factors. To begin with, the biggest problem is the rising value of the Australian dollar. The rising dollar has primarily affected the export nature in Australia, especially to Holden and Toyota. The fifty automotive brands available in the market are competing for a share of the market. Also, the high production costs and wages have impacted in making the car market uneven. The annual government funding on car companies lies between $500 million-1$ million; this has initiated a financial struggle for these automotive companies. For Holden’s Case, they realized profits from only two periods, 2012 and 2005 (Holden Company, 2016). Also, Holden company must analyze its competitive advantages. For example, when Ford made a decision to stop the production of the large falcon car in May 2013 and also the SUV in October 2016, they could focus on the implications the Ford decisions made towards the automotive parts supplier in Australia, surprisingly, it performed business with both companies.

The political landscape has also influenced Holden business perspectives. Holden must critically analyze the implications of the new regulations and laws put forth by the Australian government which is affecting the industry. Notably, Tony Abbott made promises of funding the automotive industry with $5000 million. Also, Macfarlane, the Federal Minister of Industry in Australia, discussed deliberations the govern has taken on Toyota about its future help to support the company in manufacturing vehicles but the negotiations came to a standstill. Also, Holden must focus on the complexity and costs of producing some brands of cars such as Commodore. Additionally, Holden must integrate the policies behind Free trade agreements especially with Thailand and South Korea. Therefore, the company must scan for the ultimate effects of these Free Trade Agreements. Customer demands is also another area that Holden Company must focus on; they should examine the consumer’s lifestyle patterns and their purchasing behavior and the technological requirements that customers prefer as efficient.  Therefore, it is evident that Holden company must analyze the political, economic and social parameters that could change their business strategy and avoid their earlier decisions to close down.

Critical Reflection in Managerial Foresight

Critical thinking helps a firm to approach a problem though various perspectives by locating and analyzing its faults then working on them (Thorp & Goldstein, 2010). In the case of Holden, utilizing critical reflection analysis on various aspects such as research capabilities, technological abilities, the flexibilities and willingness to adapt to change as well as understanding the dynamics, political influences and competitive nature can help its managerial foresight to remain competitive in their business. To begin with, Holden must analyze its dependency on government funding focusing on how well can they survive without funding and their abilities to generate a source of capital and if there are other alternatives. It is evident that Holden once secure a total of $250 million from the government, though it is not clear to conclude that they solely depend on government spending.

Another critical evaluation that the company must focus on is the outcome of their shutdown come the end of the year 2017. They should note a quarter of one million Australians are employed in the automotive industry. This figure stipulates to around fifty thousand persons. Therefore, shutting down the company will hurt the workforce who had worked for years with the enterprise. Additionally, they must also come to an understanding of the psychological dynamics in consumer patterns and behaviors. For example, car buyers have already believed that they will not be able to buy Holden Cars in the future, and therefore they will shift to buying from a company that is not going to stop producing. For Holden, they announced that they are planning to shut down in 2017, and they did not clarify the messages to the customers. The company has to rethink on its organizational structure, economies of scale, spending behaviors and the management policies (Thorp & Goldstein, 2010).  

Innovative Thinking and Entrepreneurial Orientation

Holden manufacturing Group can be saved if they creative thinking and strong entrepreneurial orientation coupled with bringing in troublesome solutions and ideas. First, instead of Holden Company pushing for sales of cars that had lost its sheen, the company would have understood the interplay of shifting market dynamics and come up with new products. It is important for the company to move from producing expensive Commodore to the cheap Cruze. Such a move would create competition in Thailand and South Korea. Additionally, Holden Company must embrace technology in its production process. Additionally, they can fetch out design ideas from customers to improve their overall performance. Also, Holden Company can focus on relocating its manufacturing activities to a country where the cost of production is low as compared to Australia. Even though, this strategy is centered on import-based business. Additionally, they could have come up with ideas for boosting in-house capabilities to reduce its dependency on a large number of suppliers. This method will cut off the supply chain, or rather, tighten it. Other ideas and innovative strategies that the company can adopt include; cutting down costs of engineering though parting from vehicles that are no longer in vogue and need to revive the ones that are on demand, they should come up with global concept cars that meet customer’s preferences (Davis, 2016).

Conclusion

Organizational operations can come to a halt when political, economic and social perspectives on the business are not considered fully. However, when organizations are ready to take and adapt methods to cope with the dynamics of the changing market, they will succeed tremendously. Holden needs to identify the crucial factors so that they can remain competitive and maintainable I the market despite their shutdown. Also, they can decide not to depend on the government funding as it is unpredictable.  

Bibliography

Acs, Z. J. &. S. L., 2007. Entrepreneurship, Economic Growth and Public policy. Small Business Economics, 28(2-3), pp. 109-122..

AUDIIS, 2016. Industry: Automotive. [Online]
Available at: http://www.industry.gov.au/industry/industrysectors/automotive/Pages/default.aspx
[Accessed 7 August 2016].

Audretsch, D., Lehmann, E., Paleari, S. & Vismara, S., 2016. Entrepreneurial finance and technology transfer. The Journal of Technology Transfer, 41(1), pp. 1-9.

Clibborn, S., 2012. Local Responses to a Global Downturn: Labour Adjustment in Two Multinational Companies. Journal of Industrial Relations, 54(1), pp. 41-56.

Clibborn, S., Lansbury, R. & Wright, C. F., 2013. Holden on: a manufacturing dilemma. [Online]
Available at: http://www.smh.com.au/comment/holden-on-a-manufacturing-dilemma-20131210-2z4v1.html
[Accessed 10 August 2016].

Davis, T., 2016. Revolution on Wheels: Will Australia be Participant or Spectator?. Griffith REVIEW, 52(1), p. 179.

Fletcher, R. & Crawford, H., 2013. International Marketing: an Asia-Pacific Perspective. Sydney: Pearson Higher Education AU,.

Holden Company, 2016. Cars Produced by Holden releases. [Online]
Available at: https://www.holden.com.au/about/news/media-releases
[Accessed 10 August 2016].

Thorp, H. & Goldstein, B., 2010. Engines of Innovation: The Entrepreneurial University in the Twenty-First century. 2nd ed. Chapel Hill: The University Of North Carolina Press .

Warren, L. &. H. W. E. (. ,. 3., 2000. Success Factors for High-Technology SMEs: A Case Study from Australia.. Journal of Small Business Management, 38(3), p. 86.