The Global Business Environment – Evolution and Dynamics

Posted on March 28, 2022 by Cheapest Assignment

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Introduction

The Automobile industry is considered to be one of the most influential industries that affect the economic health of a nation. The prevailing structure of the industry has been analyzed so that the state-market relationship in this automobile sector can be captured in a simpler manner (Cogta.gov.za, 2017). The industry has a large number of participants that perform different activities, so it is interesting to identify the relative bargaining positions of the multinational corporations and states that operate in the industrial setting. Since the contribution of the companies and the state is crucial to strengthen the performance of the sector, the current rapport between the two elements has been observed.

Factors affecting the relative bargaining positions of Automobile multinational corporations and states: 

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Automobile industry environment – Porter’s five forces analysis has been conducted to assess the external setting in which the automobile firms operate. The five factors that influence the competitive intensity and make it an industry attractive have been highlighted. National job growth, recessions and the ability to look for employment could affect your worker turnover and retention. For example, if the economic climate is doing well and jobs are flourishing, it may be harder to retain employees if they have other, better job opportunities to assess

The threat of new competitors is limited to the existing players in the industry since huge capital investment is necessary to set up the manufacturing units and form the distribution network (Eiti.org, 2017). It acts as a major entry barrier. In the current global automobile scenario, there are many multinational companies that compete among themselves to gain a higher market share. The buyers have strong bargaining power due to the existence of a large number of automobile companies (Zhi & WANG, 2011). The suppliers’ position is strong in the industry setting which gives them an upper hand in the industry. Due to the advancement in technology, a number of substitutes have come into existence in the market that could affect the profitability of the industry (is.muni.CZ, 2017). The high level of competition among the existing participants affects the performance and profitability of the automobile players.

Labour factor or Employment – According to the U.S. Bureau of Labor Statistics, seasonal fluctuations in certain industries can affect employment. For example, if you own an agriculture or construction company, certain seasons may call for an increase in employees as opposed to smaller necessary workforces during off-seasons. Also, the BLS states that June typically sees large fluctuations in employment rates since droves of students enter the labour force during this time “in search of summer jobs.”

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Labour is a crucial factor that affects the relative bargaining positions of multinational corporations and states operating in the Automobile industry. Due to the change in the technological setting, this power has declined but no industry can operate efficiently without the contribution and active participation of the human element (Jstor.org, 2017). The quantity and quality of labour play a major role to strengthen the automobile setting. Their technical skills and knowledge can be effectively used to strengthen the quality of the produced automobiles (Deng, 2014).

Technological factors – The changes in the technological setting has a crucial impact on the automobile sector and its performance. Currently, many multinational firms have integrated the latest technology in their automobiles so that the customers can have a better driving experience. The improved level of technology gives an edge to the firms that perform in the automobile setting (Guilford Press, 2017).

Vertical Integration – Vertical integration takes place when two or more stages of production are combined and performed as a single activity. The support and coordination between the state and the automobile concerns are crucial to simplify the production and manufacturing processes. It can help the firm to minimize the business costs and it can help the state to make sure that the resources are optimally utilized. Thus stable bargaining positions of both automobile corporations and states could be created (Jstor.org, 2017).

Relationships between multinational corporations and states in the Automobile industry: 

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There exist both the rivalry relationship and the complementary relationship between the states and the multinational corporations. Generally, the complementary relationship is observed between the two parties because the industry makes a significant contribution to the national economy and strengthens economic health. In the recent decades, the states have developed a welcoming attitude towards the MNCs that operate in their locations and this has positively affected their performance in the competitive setting (Deng, De Zoysa & Bhati, 2013). The advantages that the automobile companies and the state enjoy by having a complementary relationship include the better management of the maximizing business profits and the boosting of state GDP, introducing of new and better employment opportunities for the masses, introducing new and innovative technology in the specific setting (Jstor.org, 2017). 

Both the automobile businesses and the states in which they operate understand the relevance of one other. The states strengthen the infrastructural setting of the automobile concerns by taking a number of initiatives such as building up of roads, etc. that strengthens the transportation model, educating and strengthening the technical skills and knowledge of the workforce, protecting the private property of the business entities and providing a stable economic system so that the operations and activities of the automobile firms can be conducted in a smooth and effective manner (Ro.uow.edu.au, 2017). Due to the solid support of the states and the local government, the automobile MNCs look to their home nations and states to protect and promote their business interests. The solid performance of the business participants strengthens the industry which in turn favourably affects the economic health of the nation. Even though the relationships between states and certain MNCs could be complex and contradictory in nature, the rapport between the two parties is factorable because both of them need the support of one another to have a sustainable existence (Clarsen, 2010). 

The key benefits that both of them enjoy by having a cooperative relationship include effective utilization of technical resources, optimum use of labour, better employment opportunities, the introduction of stronger and innovative technology, steady bargaining powers of both the states and the automobile MNCs. The proper coordination between the states and the automobile firms ensures that the businesses are able to face tough competition from external players. It also makes sure that customer distribution occurs in the most feasible manner in the state. 

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According to Guilford (2017), the multinational corporations “engage very closely, sometimes collaboratively, sometimes conflict ally with the national governments for establishing, nurturing or enhancing the automobile production within their specific territories (Guilford Press, 2017). Thus, if the states want to tap into the resources that are possessed by MNCs they can do so by boosting their own automobile industry so that a win-win situation is created for both of them. Similarly, if the automobile MNCs want to tap into the resources that are controlled by the state for the purpose of advancing their business interests they can do so by increasing the employment opportunities for the local and national population. The key elements that strengthen both parties are employment, vertical integration, robust market performance, etc. Thus, Dickens has stated that the automobile industry is that paradigmatic example of competitive bidding and TNC-state bargaining (Guilford Press, 2017). 

Relationship between the Multinational Companies

The relationship between the multinational companies in the automobile organizations and the states are flexible and changeable. The multinational companies in the automobile industry have a close engagement with the state which is very flexible. This is relevant from the fact that the operation and conduction of the business that the automobile companies do with the state are collaborative on some occasions.  In some cases, the procedures and conduction of business that are conducted by the multinationals companies in the automobile sector are conflicting with the norms of the states. The multinationals companies in the automobile industry need to establish a collaborative relationship with the states for nurturing, establishing and enhancing the production of automobiles in the state and within the territories of the governance of the state (Ville, 2011). 

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This is done by the multinational companies in the automobile industry for gaining an effective stand or position in the market. On the other hand, the states lend their support to the multinational automobile companies in establishing their infrastructure and business in the state so that the state government can obtain the resources that are possessed by the multinational companies in the sector (Deng, De Zoysa & Bhati, 2013). This way the states can pursue their interest in enhancing the automobile industry of their own land. Simultaneously, the multinational companies in the automobile industry seek of tapping the resources that are regulated by the state so as to develop their interest in the business. This will assist them in producing and manufacturing automobiles and automobile products in a more effective and efficient manner. This will also help the multinational automobile companies in gaining access to the new markets (Ro.uow.edu.au, 2017).   

The states also benefit from the establishment of the multinational automobile industry by gaining large-scale opportunities for employment for its people. However, there are times when the government of the state poses changes on the conduction of business operations of the multinational business organizations in the automobile industry. This happens when there is a wave of mergers and acquisitions that result in a high concentration of the industry in the state. The operation of the business of all the multinational organizations in the automobile industry increases and has huge transactions. In the case, where there are few key investors, the states cannot have major competition in the market against among the companies.  Both the state and multinational companies in the automobile industry have the resources that the other party wants. Hence ¸there has to be the existence of a highly potent negotiating power that leads to frequent bargaining.

State-Owned Enterprises

The state-owned enterprises have a significant role in the automobile industry. These enterprises enhance the commercial conditioning of the state to a large extent which further contributes to the social and economic development of the state as a whole.  Every state has the potential to have heterogeneous companies in the automobile industry which are critical to the enhancement of entrepreneurship and skills other than improving the economic condition of the state (Guilford Press, 2017).   The role of the state-owned enterprise in this scenario has a great significance as the presence of these domestic enterprise provides a great deal of competition to the multinational companies in the automobile sector that internet to establish a business in the state (is.muni.cz, 2017). Their multinational organizations in this sector seek for the scope to undergo a spatial transformation of the industry in the state which would provide them with long term sustainability in the market. This would ultimately lead to the transformation of the assets of the assets of state including the economic state of the people of the state. 

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The state-owned enterprises are mostly needed to execute varying objectives that are sometimes conflicting in nature. This leads to the achievement of the policy goals of the public into the making of loss. This invites various universal obligations associated with the service and the uniformity of the tariffs against the rendered provisions costs. These aspects come to play during the operations of the business on a commercial front with a significant amount of competition existing in the state market. The state-owned enterprise in this regard has multiple goals that can result in negative performance in the case where their relative priority and the goals are left unclear. The state opened enterprise has to implement a clearer structure of governance in accordance with the frameworks of the state government in order to have effective functioning in the business (Cogta.gov.za, 2017).  

The fact of facing a significant amount of challenges from the establishment of multinational companies in the automobile sector cannot be denied.  Therefore, the state-owned enterprises in the automobile industry of the state need to develop and improve clearer mandates and business by the shareholders in order to maintain the demand and position the domestic market (Ville, 2011). Proper placements of the mechanisms of business operations will ensure the existence of enhanced collaborative efforts by both the state-owned enterprise and the multinationals companies in the automobile industry which will ultimately benefit the state as well as the companies as a whole.   The state-owned enterprise, as well as the multinational companies in the automobile industry, cannot solely depend on or be guided by the amount of revenue they will generate. These companies also need to measure the success of the huge business from a long-termed sustainability perspective (Ro.uow.edu.au, 2017).

Conclusion

The essay elaborated on the factors that affect the bargaining positions of the multinational companies in the automobile industry and the states that operate these businesses in the industry. A detailed description of the causes of business expansion by the multinational companies in this industry is elaborated in the essay. The relationship between the multinational corporations and the state in the automobile industry is established further in the essay. The existence of collaboration or competition between both parties is discussed which provided in-depth insights into the area. Further, the role of the state-owned enterprise in the dynamics is discussed briefly in the essay.

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References

Clarsen, G.W., 2010. Automobility ‘south of the west: toward a global conversation.

Deng, Y., 2014. Ecological modernization and the role of environmental accounting: a study of the Chinese automobile company.

Deng, Y., De Zoysa, A. and Bhati, S., 2013. Performance of automakers in China and India: an empirical investigation using ratio analysis.

Global Shift: Seventh Edition: Mapping The Changing Contours Of The World Economy (2017) available from <https://www.guilford.com/books/Global-Shift/Peter-Dicken/9781462519552> [23 December 2017]

Multinational Corporations And Nation-States: Partners, Adversaries Or Autonomous Actors?. (2017) available from <https://is.muni.cz/th/64635/fss_m/DIPLOMA_THESIS.pdf> [23 December 2017]

Multinationals And The Nation-State A. Game (2017) available from <http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1581&context=alr> [23 December 2017]

Role Of State-Owned Enterprises | Extractive Industries Transparency Initiative (2017) available from <https://eiti.org/role-of-stateowned-enterprises> [23 December 2017] 

Supplier Switching Costs And Vertical Integration In The Automobile Industry On JSTOR (2017) available from <https://www.jstor.org/stable/3003441?seq=1#page_scan_tab_contents> [23 December 2017]

The Role And Significance Of State-Owned Enterprises, Public Entities And Other Public Bodies In The Promotion Of Urban Growth And Development In South Africa (2017) available from <http://www.cogta.gov.za/cgta_2016/wp-content/uploads/2016/05/IUDF-STATE-OWNED-ENTEPRISES.pdf> [23 December 2017]

Ville, S., 2011. Historical approaches to creativity and innovation. Creativity and innovation in business and beyond: Social science perspectives and policy implications, pp.64-81.

Zhi, Y. and WANG, Z., 2011. Simulation of microstructure and properties evolution of micro-alloyed steel during hot deformation by cellular automaton. Acta Metall Sin, 47(11), pp.1396-1402.

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