Introduction
The world automobile industry always showed a growing tendency. The invention of the car by Henry Ford in the year 1896 was a turning point in world transportation history. (Automotive Industry Analysis- GM, DaimlerChrysler, Toyota, Ford, Honda). Though the automobile industry is growing at a higher speed, there are only fewer players in the world automobile market. In Italy, giants in the automobile industry include Fiat, a company established in Italy, and some foreign companies like Ford, General Motors, and Chrysler…etc. However, before entering into a market, it is better to make an analysis of the present situation of the market and also growth prospects, irrespective of the product type and nature of the business.
The trend or position of the Automobile industry in Italy
The automobile industry is one that designs, develops, produces, enters the market, and deals with automobile products. In 2008, this industry faced some problems like rising oil prices, the rising cost of raw materials, and changes in buying habits of consumers. The automobile industry in Italy was started in 1899 with the construction of the first Fiat plant. It provides huge employment opportunities to the people of that country and the Italian automobile industry has the fifth position in the European market. Nowadays Fiat group has an important role in the automobile industry in Italy. Italy’s automobile industry is famous for automobile designs and small city cars, sports cars, and supercars and thus contribute much to the gross domestic product of the country.
The automobile industry in Italy faced a setback in 2009. The sales of the automobile industry fell during this year. The experts have projected that car sales would decrease substantially in the coming years. Experts analyse that the reason for the projected decrease is the current economic crisis all over the world and it really affected the automobile industry in Italy too. There are various reasons for the decreasing sales of the automobile industry in Italy, such as increasing fuel prices, the high interest rate on loans from banks and financial institutions, etc. The government announced various policies, but they didn’t bring a desirable effect on the purchase of new cars by the customers. An expert in the automobile industry argues that this situation may continue for a long period of time. Many of the automobile companies in Italy are finding it difficult to adjust to the effects of the world economic crisis. The biggest automobile company is Fiat and it bought a 35% share in Chrysler and this buying is considered an intensive effort to face the global financial crisis. In Italy, about 138,352 cars were sold in November 2008 and it was a big fall of 29.46% after1993. Till November 2008 automobile industry produced 2.018 million cars and sold them in the market and there was a reduction of 13.40%. Association of Automobile industries in Italy advised the government to ensure financial aid from Germany and France for the development of automobile industries in Italy. (Italy Auto Industry).
Competition of automobile industries in Italy
Competition is very significant for the improvement of any organization. For instance, if two automobile industrialists are competing in the market, they would definitely improve their products and services to enhance their output. There are mainly two types of competition in the market and they are destructive competition and cooperative competition. Destructive competition is a process that damages or eliminates a competitive firm or individual in a crooked way. Co-operative competition is a process where a firm or individual competes to develop its level of happiness without infringing on other group’s or individual’s environments. Here, the Italian automobile industry is very competitive, because of the entry of many companies. There are lots of giants such as Ferrari, Lamborghini, and Fiat who are ruling the automobile industry in Italy. The government system and hectic competition in Italy are not giving much hope to a person who starts a new automobile company. It is very difficult to do the paper works and understand the laws if the investor is from outside Italy.
Fiat Group is the domestic market leader in Italy. The main success factor of Fiat is the introduction of the new model “500” and a new affordable city car and Fiat is the only manufacturer of this model in Italy. Many foreign automobile companies are working in the Italian market including Ford, General Motors, and Chryslers from the U.S.A. They operate in the Italian market through their European subsidiaries. Some other foreign companies are operating in the Italian market from countries like France, South Korea, U.K, Russia, India, Spain, Check Republic, Romania, Japan, China, Sweden, and Germany. Nowadays SUVs are a craze in Italy. There is an agreement between Chrysler and Fiat, whereby Fiat would get a 35% stake in Chrysler and the agreement between these two companies provide a new market for parts and component manufacturers of the US. (Sector Name: Automotive Parts and Service Equipment).
Strengths and success factors of the Automobile industry in Italy
The Italian automobile industry is very popular due to its automobile design. Its designing skill does not end on one side; it extends from small cars to supercars. Italy is one of the major producers of automobiles in the world and employs a large number of people. The automobile industry in Italy survived the current global meltdown. They play a vital role in Italian GDP. In 2009, the contribution of the automobile industry sector to GDP is about 11.5 %. (Mipc).
Italian government gives good support to the automobile industry. They allow a considerable reduction in tax rate and liberalized tax policy which help the automobile companies to increase their profitability. Italian automobile industry keeps an up-to-date awareness of the global market and current market trends. They earn a big amount every year through sales, though the recession caused a slight reduction in sales volume. Even in the crisis period of 2009, the sale of a car crossed 1.85 million. It indicates that the Italian car industry is very strong (Italy Auto Industry). Besides this, the highest employee satisfaction is received from this sector. Customer satisfaction due to the quality and attraction of the product is the strength of the Italian automobile industry. Some of the key factors behind the success of the automobile industry, especially the car industry, are changes and new introductions in recent years. They are “smaller cars, SUV (sports utility vehicles) and four-wheel drive vehicles.” (Payne, 60). Some other important factors which determine the success of an automobile company are quality of styling, consistency, an economy in fuel, security, warranty and guarantee.
Lose or gain factors
A market economy is a very important factor for predicting an organization’s loss or gain. The other success factors are employee mobility, strong management, cost advantages often through economies of scale, valuable product endorsement to rouse demand, tactical use of patents and technology. (Market Dominance: How Firms Gain, Hold or lose it and the Impact on Economic Performance/ Book Review).
If it is not maintained properly, the company would definitely lose. The current financial crisis has not affected the Italian automobile field much, even though the major companies such as Ferrari and Fiat have cut short employment and also reduced the work schedule. By analysing many factors, one can understand that it is not wise to start a new automobile venture in this period of recession.
Taking wise decisions
Deciding to start a new venture is a challenging task of any management. Different factors like economic environment, political environment, and cultural environment of the place where the new venture is proposed need to be analysed well. If the analysis shows a favourable result, then only further steps need to be taken. In the Italian automobile industry, there are established domestic and foreign automobile companies. Therefore, before deciding to start a new automobile venture, a detailed analysis of the industry should be conducted. However, the industry is expected to recover from the recession in one or two years. If anyone starts an automobile company at this juncture, there is a high chance of its failure. The recession affected the automobile industry in Italy, just like any other industry. The recession caused to change in the consumer trend. Now, most of the people who plan to be the owner of a car, buy a used car instead of a new car. To conclude, it is not wise to start an automobile company now. One more thing, if the proposed company is starting in future, some uniqueness should be there in the product so that the company can enjoy a good position in the market.
Works Cited
Automotive Industry Analysis- GM, DaimlerChrysler, Toyota, Ford, Honda. Academic Mind. 2008. Web.
Italy Auto Industry. Economy Watch. 2009.
Mipc. The Italian Automobile Car Industry. Surviving the Recession. Italian Property/ House in Italy/ Salemi/ Sicily/ Italy News and More. 2009.
Market Dominance: How Firms Gain, Hold or lose it and the Impact on Economic Performance/ Book Review. EH.Net. 1999.
Payne, Adrian. Handbook of CRM: Achieving Excellence in Customer Management. Butterworth- Heinemann. 2006.
Sector Name: Automotive Parts and Service Equipment. BuyUSA.Gov: US Commercial Service. 2009.