The Automotive Industry in Australia played a major role in boosting the Australian economy and bringing investments and innovation from various Companies. Bracks et al (2008) mentioned in the Final Report of the Review of Australia's Automotive Industry that “the automotive industry is an important part of the Australian economy, employing over 64000 people and accounting for almost 6 percent of manufacturing employment”.. Holden has its vehicle manufacturing in Adelaide and has over 250 dealers for distribution purposes. However, it has recently experienced restructuring in vehicle manufacturing due to several reasons. The factors that contributed to the cessation of GM Holden include a rise in Australian dollar, competition from international industry, cost of Australian labor, and government subsidies. Clibborn, Lansbury and Wright (2019) explain thoroughly in their research paper as to how and why this major shift occurred in the Australian automotive vehicle manufacturing. The paper tells that the government abandoned the protectionist policies and ended up in a failed attempt to encourage the local producers to compete and modernize their production. Moreover, the relative cost of the vehicles produced in Australia increased due to the appreciation of the Australian dollar and ended the competitiveness of the local vehicle manufacturers.
At first the active strategy of modernizing local production seemed successful but it also had drawbacks as the tariffs against imports increased and making the Australian vehicles expensive than those of Europe and North America, thus, decreasing the domestic sales and production. Moreover, Holden manufactured cars in the Australian Vehicle Industry that was designed according to the tastes of the customers. This meant high labor and production costs for the specific designs and models of the car as they were not “integrated” with design specifications, engineering and marketing of its parent firms. Although the Australian government introduced some subsidies due to the intervention of the labour union of the industry, they came in late, therefore, “….domestic production continued to shrink in the face of overwhelming import penetration, flagging exports, and an overvalued currency” (Stanford 2017).
Although Holden introduced some strategies to overcome these challenges, it failed to cope up with the restructuring of the Automotive Vehicle Manufacturing Industry in Australia. Wright, Clibborn, and Lansbury (2011) described that Holden reduced its production in Australia which led to unemployment and financial losses. The paper also states that there was “…a shift in Holden’s production strategy towards the growing preference of Australian consumers for more fuel-efficient and environmentally friendly vehicles. However, profit margins on small cars are significantly lower than those on larger vehicles and may not deliver an anticipated increase in Holden’s revenue”
The Five Forces model and the Competitors Analysis of the Holden-General Motors Australia will clarify the position of the Company in the Australian Industry. The Five Forces of the Porter’s Model for Holden are as follows:
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