F&B JU

Course Title Strategic Management Course Code FNB 309

Department of Finance & Banking

Production and Marketing of a Global Car: The Strategic Issues

Md. Atiqur Rahman Sarker Sr. Lecturer and Course Instructor Department of Finance & Banking Jahangirnagar University.

Submitted to:

Name Submitted by: MD. Jobair Bin Habib

Student ID 602

09 September 2013 Savar, Dhaka

BBA program, Batch- 02 Department of Finance & Banking Jahangirnagar University

1. Summary: An US based automobile manufacturer launched different types of cars in a very competitive market. To gain the strength in the market, it finally introduced a global car, an engineering of three countries, after unsuccessfully trying to do so for two times. Now, despite the fact about the profitability and sustainability, the automaker is hopeful about the future of this global car. 2. World car: To my opinion the car is not a global car. For holding the title of a global car, it has to ensure several facts. Before going to describe it deliberately lets have a quick view about what is a global car. Main features of a global car The car should be found everywhere The cost for both manufacturer and customer should be low The price should not vary significantly in different countries Universal design for the whole world with a little modification if needed. While considering the all factors, it cannot be said that the global car is not a real global car. Criteria Availability Compatibility Note Moderate Not available in other region except for USA and European countries Cost of the manufacturer Moderate Not the lowest cost compared to others Cost for the customers High European customers have to pay more than US customers Currency fluctuations High Price of the car is significantly different in several regions Universal design Yes The car is universally designed Competitiveness Not unique It does not have the competitive advantage Leverage of resources Enabled The manufacturer can control the leverage ratio From the above description we can conclude that the companys newly developed car is not really a global car. Though it has a unique and universal design, it has to compete very hard to be successful. Here the major issue is the cost efficiency. The company can reduce the price of the new car especially in the European region, by offshoring the production to China where the

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production cost is lower than any other country in the world. The company can also launch the car in newly emerging economies like Brazil, India or in China. 3. Advantages and disadvantages There are huge advantages of trying to develop a single product for a global market and of course a lot of other disadvantages tailed by one product for one world. Major advantages: Low cost of manufacturing- raw materials can be accumulated from different sources where the prices are comparatively low. The biggest advantage of a global product is that it enables the company to leverage economies of scale. When it sells the same product worldwide, it can buy its raw materials in a huge amount, saving the company hundreds of thousands of money. Economies of scale can save a companys money in labor, packaging, production and material costs, too. Chances for off-shore manufacturing to reduce the cost. Global recognition of the brand can help to enter into the new market. The design, technology and the process of the global product can be used in the making of regional or different products, which will save the money a lot. A bigger portion of profit can be drained through global product. In many local markets, the global product offers greater value and delight the customers well. Major disadvantages: One product for different region with different preferences may not be successful. Some markets have particular tastes or are more sensitive to pricing. It is true that a company's products are more popular in one country than another country; deciding in which country a product will be popular is a problem. If a company estimates incorrectly, the mistake could cost it a fortune. Channeling the whole world is time consuming and costly. Government legislation can hinder the growth in any foreign country. Local brands can beat the global product if the brand is renowned and offers greater value. The price must be equivalent or a little bit better than the local market while it is not always possible for the manufacturer to offer such prices because it costs more than the offering price in the existing market.

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 Sometimes the profit margin is very low, that is quite disappointing and discomforting the company. Strategically it is not possible to introduce the global product in some regions. Where there is a good opportunity, there is also an opportunity cost. The company always have to take under consideration that risks bear huge profit. Thats why it is wise to make some global products and secure the benefit for further usage. 4. Automobile in making global car: Of course an automobile company should have a strategy for developing a global car. This strategy can be taken to compete head to head with the rivals, while enjoying the benefits of economies of scale, producing the highest will lower the total cost. The reasons that an automobile company should have a strategy for developing a global products are given below The new car will create a brand image for the automobile Profit margin from this car can be used for offsetting the risk of other cars. The company can grab the global market more firmly. For expansion, the company have to merge or co-brand with other local brands. Gaining the shares of other corporations will help the company to grow bigger and more successful. As well as this procedure will help the locals to survive for a long time and confirming the sustainability. Trade between different countries will happen, and it will help to grow the sale of cars more, even for other different and modified cars. Brand recognition will help the company to introduce new cars in the foreign markets. Introducing a global car is an excellent idea for the development of better economy both for the automobile manufacturer and the global market.

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