One the challenges include cost pressure and complexity
A multinational corporation controls and owns production of services and goods in other countries other than its home country. A company can only be termed as a multinational corporation when it derives twenty five percent of the revenues from out of the home country. The automotive company comprises of huge range of organizations and companies which involves development, manufacturing, marketing, selling and designing of motor vehicles who can also be termed as automakers. Automotive industry is one of the world’s most important economic sectors in terms of revenue. Multinational corporations comprise of those organizations which are geographically dispersed and goal disparate which also includes headquarters and various kinds of national subsidiaries. This kind of an entity can be termed as an inter-organizational network which is embedded in a network which is external and consists of all other organizations such as suppliers, regulators and customers with which all various parts of the multinational should interact (Sun 2016). The link present between the hierarchical power and the ownership in an organization is quite weaker than it is assumed. The automotive industry began in the year of 1860. The importance of automotive industry is huge in European Union. The automotive industry has an oligopolistic structure which will strengthen the power of the company management in production networks as there is a presence of huge number of suppliers for a single vehicle. Most of the European outward and inward foreign direct investment are intra-regional in nature (Pavlínek 2015). The most important producers of the automotive companies comprise of the United States, Japan, Western Europe and South Korea. Car producers of China such as Greely, Chana, Dongfed and Tata from India often represents the largest multinational companies in the world. Network is the term used for any pattern of relationships among organizations or people where everything is related or linked to every organization or the person in the pattern directly or indirectly.
Multinational companies usually have their headquarters in their home countries and they also have their operational division spread all over the foreign countries in order to reduce their costs. The maximum portion of the capital assets of the main company is usually owned by the citizens of the host company. They are usually a large sized organization who exercises a huge degree of economic dominance. There is presence of several advantages and disadvantages of the multinational corporations. One of the primary advantages of the MNCs is access to the customers all throughout the world. With the increase in access to wide geographical regions will attract potential consumers and, in this way, they can expand and grow at a faster rate. Access to cheap labour is also one of the biggest advantages that MNCs can have. Countries such as China, India and Pakistan provide cheap labour to the MNCs. The multinational corporations also help in research and development of economy. The operations also help in the improvement of the balance of payments which can be achieved by increasing and decreasing exports and imports (Conlon and Perkins 2018). Although the automotive industry is very much technologically advanced, the rise in integration of low-income countries has put huge pressure on the automobile producing countries. New producers have emerged from Latin America, Asia and from Southern Europe. The low skilled workers of the automotive industry therefore suffered from deteriorating wages and worse employment prospects in the process of globalization. The emergence of exporters of automobiles have increased a lot and is quite frequent due to the foreign direct investment in developing countries.
The global sales of the passenger automobiles are intended to hit 78.6 million in the recent years. The United States and China have been the largest producer of automobiles in the year 2017. The U.S has also become the key automotive market from the 1900s. this was the time when Ford produced assembly line car in order to manufacture Model T. Europe exported about six million vehicles to the USA, China, Turkey, Russia and Switzerland. There is also a rise in the demand for fuel efficient cars recently. The top six countries in terms of emission reduction are Poland, Slovenia, Bulgaria, Cyprus and Estonia. Though, there was a decline in the sales of the vehicles in Russia and Turkey, the consumer demand in Asia is high, where the sales of the passenger cars have doubled over the years. The automotive industry has also been the major provider of jobs for the citizens.
The automotive industry will face large number of challenges and opportunities. One of the challenges include cost pressure and complexity. As there is increase in the regulations related to the environmental and safety standards, it will raise the costs and will also increase the complexity. The increasing number of derivatives that are serving different vehicle segments o n a single platform will also raise complexity. Japan, China and the US have enacted various laws in order to reduce emissions which will lead to higher costs. The regulation of carbon dioxide will continue to tighten. In order to avoid the use of fuels and gas, the use of electric vehicles might be the answer (Holmes et al. 2016). China has become the world’s largest automobile market with around nineteen million vehicles being sold in the year 2012. There will be a shift in the automotive industry’s economic centre of gravity when sales and market share keep moving towards the emerging markets. The smaller vehicles also have a major growth opportunity which accounted for more than thirty percent of global sales where more than sixty percent of global sales are presented in emerging economies.
Literature review:
In order compare the network models of the multinational corporations, a literature review must be carried out. The framework suggested by Bartlett and Ghoshal is one of the most powerful framework which is very detailed and consistent. They provided a clear picture of their Transnational Model. They also declared to follow the importance of the transnational model. This is the reason why the framework suggested by Bartlett and Ghoshal is one of the extremely rich source. Secondly, the ideas of the Heterarchy by Hedlund are slightly vague when compared to the model developed by Bartlett and Ghoshal’s transnational model. The analysis of the work of Hedlund has to be restricted who explicitly deal with Heterarchy. The N form Corporation (Moreno and Terwiesch 2015), MNC as a Nearly Recomposable System and Self renewing MNC are all introduced by Hedlund. It also sees flows as a basic characteristics of the multinational corporations. Thirdly, the work of Doz and Prahalad is of great importance in order to understand the model of DMNC. The article was published in the year of 1991. The authors in this paper systematically tried to describe the characteristics of the DMNC and the characterics was described in this part. They all provide a good understanding of the assumptions of the modern multinational companies and about the flows within the MNCs. Next comes the Horizontal organization which is mainly described by White and Poynter. The articles of White and Poynter appeared in Business Quarterly. As there is not enough information available it is difficult to know whether the flows are only marginally important for White and Poynter. It was also found out that the theory of White was also interesting enough.
Global structure and market orientation of automotive industry:
The automotive industry is presently confronting to be its greatest innovation. Transformation is one of the crucial part in the modern automotive industry. By considering the size of the industry it can be said that it has the power to continue to influence the direction in which humanity will progress in future (Conlon and Perkins 2018). Some of the trends which can lead to the transformation of the automotive industry consists of autonomous driving, this is undoubtedly one of the very important trends that has been ruling the automobile industry. Connected vehicles is another trend for transforming the industry. Connected vehicles will have the ability to share details about the driving conditions to the other people. Next comes the increase in electric vehicles. With the increase in non -renewable energy crisis, more models of electric vehicles will get into the mass production. Several professionals and industry experts are forecasting that electric cars will soon become more cost effective and much more popular compared to vehicles run by diesel or petrol. Leading automobile manufacturers like Volkswagen, General Motors and Daimler AG already have the entered the market of electric markets.
Reference list
Arboletti, A., Torresani, G., Palle, N. and Segerberg, P., Accenture Global Services Ltd, 2014. Automotive industry high performance capability assessment. U.S. Patent 8,781,882.
Foss, N.J. and Pedersen, T., 2002. Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context. Journal of International Management, 8(1), pp.49-67.
Harwit, E., 2016. China's Automobile Industry: Policies, Problems and Prospects: Policies, Problems and Prospects. Routledge.
Pavlínek, P., 2015. The impact of the 2008–2009 crisis on the automotive industry: global trends and firm-level effects in Central Europe. European Urban and Regional Studies, 22(1), pp.20-40.
Pavlínek, P., 2016. Whose success? The state–foreign capital nexus and the development of the automotive industry in Slovakia. European Urban and Regional Studies, 23(4), pp.571-593.