Entrepreneurship Feb. 21

In what areas of the industry are there opportunities for innovation?

Since today’s world is crazy about saving energy and cutting down on emissions, most car industries are trying to develop Hybrid models or fully electric cars that will attract customers. Every car company is working on developing a power saving car that is both affordable and luxurious. One big example is Toyota’s Prius starting at $23,050. Another example is Honda Insight with starting price of $18,200. According to http://www.hybridcenter.org/hybrid-timeline.html, in 2010 there were 18 hybrid cars on the market and 14 companies that manufacture them. Compared to any previous year, 2010 has produced the most Hybrid cars because of the trend of customers seeking echo friendly ways to live.

There is also other ways that car companies are trying to innovate their vehicles and to attract more customers. One very important way is censors that can cense cars hitting their breaks in front of the car; they can also monitor facial expressions in order to tell if the driver is sleepy and warn them to pull over. The technology has gotten as far as having cars being able to detect objects that are not moving and react before the driver does. Other types of sensors include: windshield wipers that can detect the amount of rain and adjust to the right speed without the driver’s interaction, there are also smell sensors that will close the outside intake of air when there is a bad smell and so on.

Overall car companies are trying to attract people to their cars by making driving very easy and luxurious.

Sources:

http://auto.ihs.com/news/newsletters/auto-nov04-automotive-innovation.htm

http://www.toyota.com/prius-hybrid/trims-prices.html

http://automobiles.honda.com/insight-hybrid/

http://www.hybridcenter.org/hybrid-timeline.html

Entrepreneurship: Feb. 21, 2011

What have been entrepreneurial companies in the past and how have they affected the competitive landscape in the industry? Were they acquired by larger companies? Did they grow to become market leaders?

Most of the major car companies nowadays have been started by intelligent entrepreneurs. Furthermore, those brands are controlling the auto market locally and globally. For example, let's talk about Henry Ford who created his first vehicle in 1896. Ford became an engineer in 1891 in Detroit. Then, he was promoted to be a Chief Engineer in 1893 in which this position provided Ford with time and money to explore and testify his own experiments. According to our book "Better Business," Ford is a combination of a lifestyle and a growth entrepreneur. The first one because he wanted to test his experiments rather than gaining profits. The existence of Ford brand in six continents and more than 164, 000 employes who serve those branches are clear signs of Ford's growth.

The auto market is divided to three levels of competition: high, medium, and low. Those entrepreneurs, such as Henry Ford, Karl Benz (who invented Mercedes), and others are the people who created those levels. The reason why is because they set high values, inspirations, and innovations under their brand. Undoubtedly, Ford and Benz are in the high level competition. However, those grand companies did not achieve this success in a short time. Ford created his first car 115 years ago.

References:

http://www.hfmgv.org/exhibits/hf/

http://corporate.ford.com/about-ford

Economics of the Industry- Feb 7th

Economics of the Industry

Discuss the Supply and Demand of the Automotive Industry.

In the early years of the automotive industry, the demand for these vehicles was very small seeing that only the wealthiest could afford to own one. However, once it became easier for manufactures to put together the cars (I.E. Henry Ford's assembly line), these cars became more accessible to the general public although not nearly as accessible as they are now. Supply was also very small because there were not many manufacturers at the beginning of the automotive industry. Further into the 20th century, cars became more and more of a necessity as villages became towns and towns became cities. As the demand heightened, so too did the supply. More and more manufacturers began to pop up and there was even a city (Detroit) completely devoted to the automotive industry.

Today, the automotive industry is at its peak as cars have become a necessity rather than a luxury. The demand however has shifted recently from huge, gas-guzzling cars, to eco-friendly, efficient cars. The demand for cars overall is fairly inelastic because a car is a necessity. However, if we are looking at car companies as individuals, there products are typically very elastic because most people (aside from those who can afford it) will not pay $60,000 for a mercedes benz when they can get a more efficient, cheaper car that shares the same purpose.

Web Source

Economics of the Industry - Feb. 7th

What are their costs?

There are three major costs associated with the making of an automobile:

Labor - most of the assembling of a vehicle is done by machines and robot, but the biggest portion of the labor costs goes towards designing and engineering automobiles.

Materials - "Everything from steel, aluminum, dashboards, seats, tires, etc. are purchased from suppliers." (Industry, 1).

Advertising - car manufacturers spend billions on dollars to advertise each year. They also spend large amounts of money on consumer research in order to predict what the consumers will want in the future. Here are the money that some of the major companies spend on advertising in 2008:

1. General Motors (GM) - $535 million for
2. Toyota - $291million
3. Ford - $292 million
4. Chrysler - $186 million

That is a part of the article "The Industry Handbook: Automobiles":

The auto market is thought to be made primarily of automakers, but auto parts makes up another lucrative sector of the market. The major areas of auto parts manufacturing are:

• Original Equipment Manufacturers (OEMs) - The big auto manufacturers do produce some of their own parts, but they can't produce every part and component that goes into a new vehicle. Companies in this industry manufacture everything from door handles to seats.
• Replacement Parts Production and Distribution - These are the parts that are replaced after the purchase of a vehicle. Air filters, oil filers and replacement lights are examples of products from this area of the sector.
• Rubber Fabrication - This includes everything from tires, hoses, belts, etc.

http://www.investopedia.com/features/industryhandbook/automobile.asp

http://webcache.googleusercontent.com/search?q=cache:uc76ups9UzgJ:www.leftlanenews.com/ford-chrysler-cut-advertising-costs-while-toyota-and-gm-boost-it.html+toyota+advertising+cost&cd=1&hl=en&ct=clnk&gl=us&source=www.google.com

Feb 7th, Economics of the Industry

Q) What drives revenue growth in this industry (i.e. more units sold, expanding geographic reach, lower costs for manufacturing, etc.)?

Well first of all, almost all of the companies(not just only the automobile companies) gain their profits by selling more of their products to customers.
This also applies for the automobile companies as well. They tend to sell more
and in order to do so, they would have to meet customer's demands for it.

Revenues for car industries can be sorted out in many different categories.
The interesting part is that the revenues can differ from its many different
environment factors. Therefore, companies will try to follow the trend of the
changing demands for consumers.

As we know, nowadays we can see a lot of electric automobiles being produced since consumers and the society concerns significantly on environment factors. To meet the current trend, automobile companies would try to maximise their revenues by considering the today's trend as well.

There was an interesting article about the German automotive company 'Mercedez-Benz'
is shifting its trend to produce batteries. Regarding how important the automobile companies affect towards German economy, it is surely interesting to see how and why
the Mercedez company is changing their traditions towards electricity rather than their own gas based engine.

It would be interesting to see the result, within 10-15years from now and to see
whether it was a correct decision to step into the electric industry or not!

http://www.asiatoday.co.kr/news/view.asp?seq=443177

Economics of the industry: Feb. 7, 2011

How do companies make their money?

In the automobile industry, there are several ways that cars' companies can generate profits. However, I found three different ways that auto companies depend on to make money. They are increase in production, international trade, and industrial sites investments.

First, production which is the most important factor for auto companies to earn profits. If production increases, auto companies will earn more money. To increase their production in the market, they attempt to rise up the number of cars to their dealers. According to the article "Ford to Boost Car Output in U.S. Market," Ford wants to increase its supply to dealers by 13% this quarter. Ford might also increase the cars' production in the coming year. Furthermore, GM claimed that 90% of its dealers have announced profits last year. Also, GM's profits increased to 23% in January, 2011 comparing with January, 2010.

Second, some companies tend to have different ways to generate money like trading globally. For example, one of Chrysler's goals is to increase the international trade of its cars. In addition, there is a plan to let Chrysler's cars consume a 40-mile of a gallon in one hour which makes their cars more in demand locally and internationally. Chrysler believes that by reaching these two steps, they would increase the profits 5% more to reach 35% of its final ownership

Finally, several auto companies invest in their own sites of industry. For instance, Renault is planning to invest $7.9 billion in their industrial places from 2010 to 2013. It will invest 40% of that amount in France because it has the highest number of market share of Renault between European countries. Renault also wants to invest in hybrid cars and to be one of the biggest companies that produce hybrid cars in the next decades. Because it thinks that hybrid cars would be the future market.

In my own experience, I believe that there are several more methods to make money for auto companies. Additional features is one of these methods. Cars companies, such as BMW, Audi, and others offer heated seats, navigation, or sport packages which increase the price of the vehicle. Those companies benefit from these features by earning more money because they make the pieces by themselves and in their own factories. The second point is the service maintenance that auto companies offer, such as the usual service and advanced servicing for major issues. These companies know that their customers need service to maintain their cars, so these companies charge for service programs after certain time or creation milage. Again, the costs for services are very small comparing with their profits.

References

http://online.wsj.com/article/SB10001424052748703439504576115732631840502.html

http://online.wsj.com/article/SB10001424052748703445904576118072489186028.html?mod=WSJ_auto_MiddleSecondHighlights

http://online.wsj.com/article/SB10001424052748704858404576128603352890980.html?mod=WSJ_auto_IndustryCollection

http://online.wsj.com/article/SB10001424052748703960804576119970736042258.html?mod=WSJ_auto_IndustryCollection

http://online.wsj.com/article/SB10001424052748704843304576126491545116416.html?mod=WSJ_auto_IndustryCollection

Economics of the Industry: Feb. 7, 2011

Discuss supply and demand in the industry.

To me there is never an equilibrium of supply and demand. It seems as if there is always too much of something or not enough. In the recent years the supply of vehicles in the auto industry was at a surplus where as the demand for them was very low. In the new year we have seen a rise in sales for some of the major car companies. Every year there is an auto show which showcases many of the hot new cars out. I decided to watch it for sometime. I noticed some of the things these companies were doing to promote their automobiles. One is powered by electricity, another is a hybrid and this one here has some ridiculous top speed and can also park itself. Auto companies are trying to make their products attractive both to the consumers eye and wallet to promote sales which in turn encourages an increase in both demand and supply.

A recent article, Swedish Truck Makers Suffer Production Woes shows how supply and demand can affect a company. Supply and demand affect production. When production is down due to a decrease in demand auto companies may let go some of their workers. When the demand goes up again in the new year these companies have to hire people again and have them go through training to be able to work in production. The suppliers are also heavily affected; they have to crank out as much supplies as the industry demands. It is only ideal that the price of a product increase as the demand increases. In order for the suppliers to get their product out in a timely manner especially if they are out of stock, it will take more money and time. This is a huge part of how everyone who puts in work to the manufacturing process of these automobiles makes profit. Another thing mentioned in this article was how an easy mistake or miscommunication can mess up the whole "production chain." In order for things to be successful everyone has to be on the same page. Supply and demand are tough things to work with in the auto industry.

Sources: http://online.wsj.com/article/SB10001424052748704709304576123994201733916.html?mod=WSJ_auto_IndustryCollection