墨尔本essay代写:Reprot on Reasons that the Australian Car Manufacturing Industry is Closing Down
 
Reprot on
Reasons that the Australian Car Manufacturing Industry is Closing Down

 
Table of contents
1.0 Introduction. 2
2.0 Analysis. 2
2.1 Factors of production. 2
2.1.1 Raw materials cost 2
2.1.2 Labor costs. 3
2.2 Reduction in tariffs. 3
2.3 Porter’s five forces. 4
2.3.1Bargaining power of suppliers. 4
2.3.2 Bargaining power of buyers. 4
2.3.3 Substitute threat 5
2.3.4 The present competitors. 5
2.3.5 The new intruder. 5
3.0 Conclusion and recommendation. 6
4.0 Reference. 7
 
 

1.0 Introduction
In the past tens of years, automobile manufacturing had gone through a golden age. It attracted some famous companies to invest. However, taking a broad view of the Australian car manufacturing industry, we can see that Australian is facing a serious problem that the automobile manufacturing in Australia is in trouble. Last May, Ford Motor Company said it would stop manufacturing in Australia, and General Motors announced late last year that it also plans to suspend factory operations in the country. In the meantime, Toyota says more than two thousand of its workers will lose their jobs. To make matters worse, trade unions say the company's decision to end production could leave 50,000 Australians jobless and take $19 billion away from the Australian economy (Thomas, 2001). People in Australia are getting more and more dissatisfied with the government. Nowadays, Australia is confronted with an unprecedented challenge.
2.0 Analysis
2.1 Factors of production
2.1.1 Raw materials cost
Australia is a country with a large number of rich resources. During the past decades, the price of the raw materials keeps a stable price. For this, the cost makes the automobile manufacturer acceptable.
While in recent years, with the development of the whole Australian society and the global economy, the cost of raw materials is becoming higher and higher all around the world. To some extent, there is no doubt that this will increase the pressure of automobile manufacturer.  In fact, in recent years, the manufacturers have gained a large sum of capital to cope with the rising costs, but still cannot fill the high costs of local auto manufacturing caused by the huge gap. This is one of the important causes leading to the car price to go up. Beyond doubt, to those automobile manufacturers who are pursing benefit, they are not willing to see that. Therefore, it is the main reason that they choose to transfer the production line.
2.1.2 Labor costs
At that period, the reason why foreign manufacturers were willing to make an investment to Australia is that the cheap labors. With the rise of the automobile industry, a large number of local people came to factories to find jobs, which helped the government solved lots of employment problems. What’s more, it created tax resources for Australia, which brings considerable revenue for the local government. However, with the rise of the labor costs, merchants had to pay more than ever before, which means that labors could get a better salary (Jae, 2003). Although the Australian government gives these manufacturers many plenty of preferential policy and funding support, the capitalists still cannot be pleased with what they have achieved. Pursuing the profit maximization is the eternal theme for businessmen. In order to realize the goal, manufacturers have to transfer the production line to other places, such as China and some other Asian countries, which own a large sum of cheap labors.
2.2 Reduction in tariffs
Reduction in tariffs may have a strong impact on the internal economy. The reduction in tariffs will attract more foreign company to export mobiles to Australia. With the increasing number of mobiles from foreign countries, the local mobile manufacturers may face great challenge and pressure, interns of setting price and improving quality. In 2001, the import rate of mobile to Australia reached 70% which has been a crazy number, but now, the index has climbed up to 90%. Among the total 1.2 million cars selling in Australia, one million of them are imported from foreign countries (Child and Tse, 2010).
The prime minister in Australia stated that though government was willing to support mobile industry, but the policy has its base line. Increasing tariffs in order or protect local mobile industry is not a feasible measure and the government would not be allowed to do like this as well. For example, when the Toyota manufacture left Australia market, the AAA called government to reduce or even cut off mobile tariffs (Jane, Xiang and Yen, 2005). Due to the market demand and external pressure, the government should take some action on tariffs and once the reduction in tariffs policy was carried out, the local mobile industry increase their possibility of going bankrupt.
Moreover, with the tariffs protection from government, most of Australia mobile industries are focusing their business on high oil consumption automotive area. When the oil price climbs up suddenly and a large number of low oil-consumption mobiles occupied the Australia market, the local mobile manufactures loss all competitiveness.
2.3 Porter’s five forces
2.3.1Bargaining power of suppliers
Based on the analysis of material cost and labor cost above, mobile suppliers in Australia do not have strong bargaining power. Bargaining power may come from the scale production where components for mobile manufacturing could be purchased in large scale (Scott, 2003). But due to the high cost in both material and labor, manufactures in Australia loss advantage in bargaining. In addition, with the large amount of import automobiles, suppliers could not raise their price as their will.
2.3.2 Bargaining power of buyers
Demand on Australia cares reduce year by year, and even Australia buyers would like to buy car from other countries. Appreciate in Australia dollar has great impact on buyer bargaining power as well, which leave opposite impact on manufactures. Strong buyer power in bargaining added pressure to mobile industry and force them to find new market from all over the world.
2.3.3 Substitute threat
Though the impact from substitute in Australia mobile industry is not that serious, the environmental-friendly vehicle affects the market demand of automobile all over the world.  Substitute threat grabs large number of customers and making the mobile market shrink.
2.3.4 The present competitors
There are four main mobile manufactures in Australia, Toyota, Mitsubishi, Ford and GM. Affected by imported cars and appreciate in Australia dollar, Toyota has withdrawn from Australia and some other mobile brand is forcing to change market. Competitiveness from imported mobiles is one of the most influential factors that lead to the closing down of Australia car industry (Jane, Xiang and Fen, 2005).
2.3.5 The new intruder
Lowe tariff attracts new intruder into Australia mobile industry. Other automobile manufactures make use of the low cost of material and labor in Australia area to produce quality and cost effectiveness mobiles, and export them to Australia. New intruder is occupying larger and larger mobile market due to innovations and price advantage.
墨尔本essay代写:Reprot on Reasons that the Australian Car Manufacturing Industry is Closing Down
2.3.6 Economies of scale
Scale merit could be gained when factories operate in optimal scale. Mass production bring price advantage in purchasing components and material and well as labor cost, consequently reduce the total manufacturing cost.
However, due to the downturn in Australia car industry, car factories can’t afford to operate in large scale. Lots of company downsize themselves step by step in order to keep the operating capital. However, downsizing has an opposite impact and accelerates the closing down of local mobile industry. Fixed assets account large for the whole assets so once the operation scale was downsized, the fixed cost is unavoidable but the marginal profit decline, the companies become less competitive compared with those max factories. Increase in material cost make factories loss their economy of scale.
3.0 Conclusion and recommendation
Australia mobile industry goes closing down in recent years and lots of famous car firms withdrawn from Australia market. The recession of car industry result from various factors. Firstly, increase in material cost and labor cost added total cost to the manufacturing, eroding the corporate profit. Besides, appreciate in Australia dollars further weaken advantage for manufactures as their manufacturing cost increase but sales earns reduce.
Based on the Porter Five Force model, suppliers loss their bargaining power while buyers have strong bargaining power, which result in the weak competitiveness in mobile market. New intruders mainly from foreign countries, who have their manufacturing base in low-cost area such as Asia, make local car manufacturers overwhelmed now and there. In addition, present competitors also force local manufactures to leave the market as they could get advantage from low tariffs.
Last but not least, loss of economy scale may be the most influential factor to lead to the closing down of mobile industry. It is high manufacturing cost and appreciation in dollars that result in the loss of economy scale and the diseconomy of scale make their market and profit shrink, and consequently, force them to give up the Australia market.
So to revitalize the mobile industry in Australia, some measures could be taken such as, reducing price for industry material with the assist of government, encouraging innovation and diversity among local mobile industry to ensure the competitiveness of Australia mobile firms. Moreover, tariffs policy and capital policy should be adjusted carefully based on a comprehensive research and professional analysis. The reasonable and logical policy is the guarantee of normal development of mobile industry.
 
4.0 Reference
Child, J. and Tse, David K, 2010, Australia’s Transition and its Implications for International Business, Journal of International Business Studies, vol. 32, no. 3, pp. 34-35.
Jae, Ho Chung. 2003, The political economy of industrial restructuring in China: the case of civil aviation, The China Journal. vol. 32, no. 3, pp. 34-35.
Jane, Chang, Xiang, F. & Fen, D. 2005, China’s telecommunication market for international investors: opportunities, challenges, and strategies. Technology in Society. vol. 32, no. 3, pp. 34-35.
Jane, C, Xiang, F & Yen, D. 2005, China’s telecommunication market for international investors: opportunities, challenges, and strategies. Technology in Society. vol. 32, no. 3, pp. 34-35.
Scott, K. 2003, The Price of Competition: Pricing Policies and The Struggle to Define China’s Economics System, The China Journal, vol. 32, no. 3, pp. 34-35.
Thomas, J. S. 2001, International trade and protection of the environment: the continuing search for reconciliation, The American Journal of International Law. vol.32, no.3, pp.34-35
 墨尔本essay代写:Reprot on Reasons that the Australian Car Manufacturing Industry is Closing Down