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5th year MBA (A)
Submitted to: Swati Mam
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A concept relating to the different stages an industry will go through, from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle. They are defined as: i. Early Stages Phase - alternative product design and positioning, establishing the range and boundaries of the industry itself. ii. Innovation Phase - Product innovation declines, process innovation begins and a "dominant design" will arrive. iii. Cost or Shakeout Phase - Companies settle on the "dominant design"; economies of scale are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry become very high, as large-scale consolidation occurs. iv. Maturity - Growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the space. v. Decline - Revenues declining; the industry as a whole may be supplanted by a new one.
: Growth Industry life cycle stage
Germany is a federal parliamentary republic in west-central Europe. The country consists of 16 states, and its capital and largest city is Berlin. Germany covers an area of 357,021 square kilometers (137,847 sq. mi) and has a largely temperate seasonal climate. With 81.8 million inhabitants, it is the most populous member state in the European Union. Germany is one of the major political and economic powers of the European continent and a historic leader in many theoretical and technical fields.
A region named Germania, inhabited by several Germanic peoples, was documented before AD 100. During the Migration Period, the Germanic tribes expanded southward and established successor kingdoms throughout much of Europe. Beginning in the 10th century, German territories formed a central part of the Holy Roman Empire.[10] During the 16th century, northern German regions became the center of the Protestant Reformation while southern and western parts remained dominated by Roman Catholic denominations, with the two factions clashing in the Thirty Years' War, marking the beginning of the Catholic–Protestant divide that has characterized German society ever since.[11] Occupied during the Napoleonic Wars, the rise of Pan-Germanism inside the German Confederation resulted in the unification of most of the German states in 1871 into the German Empire, which was Prussian dominated.
After the German Revolution of 1918–1919 and the subsequent military surrender in World War I, the Empire was replaced by the parliamentary Weimar Republic in 1918, and some of its territory partitioned in the Treaty of Versailles. Despite its lead in many scientific and artistic fields at this time, amidst the Great Depression, the Third Reich was established in 1933. The latter period was marked by fascism and World War II. After 1945, Germany was divided by allied occupation, and evolved into two states, East Germany and West Germany. In 1990, the country was reunified.
Germany was a founding member of the European Community in 1957, which became the EU in 1993. It is part of the Schengen Area and since 1999 a member of the euro area. Germany is a great power and member of the United Nations, NATO, the G8, the G20, the OECD and the Council of Europe, and took a non-permanent seat on the UN Security Council for the 2011–2012 term.
Germany has the world's fourth largest economy by nominal GDP and the fifth largest by purchasing power parity. Germany is the second largest exporter and third largest importer of goods. The country has developed a very high standard of living and features a comprehensive system of social security; the country has the world's oldest universal health care system. Germany has been the home of many influential philosophers, music composers, scientists and inventors, and is known for its cultural and political history.
The automobile industry in Germany is one of the largest employers in the country, with a strong labour force of over 866,000 (2005) working in the industry.
With an annual output near 6 million and a 35.6% share of the European Union now, Germany is the absolute leader of auto production in Europe since the 1960s, and in World was the third during 1970s middle of 2000s and is fourth now (conceding to China, United States and Japan only).Germany designed cars won in the European Car of the Year, the International Car of the Year, the World Car of the Year annual awards one of the most times among other countries. Two cars (Volkswagen Beetle and Porsche 911) took 4th and 5th places in the Car of the Century award.
Germany is considered to be the birthplace of the automobile since Karl Benz and Nikolaus Otto independently developed four-stroke internal combustion engines in the late 1870s, with Benz fitting his design to a coach in 1887, which led to the modern day motor car. By 1901, Germany was producing about 900 cars a year.[1] In 1926, Daimler-Benz was formed from the predecessor companies of Karl Benz and Gottlieb Daimler and produced cars under the marque of Mercedes-Benz. In 1916 BMW was founded, but didn't start auto production until 1928.
American economist Robert A. Brady extensively documented the rationalization movement that shaped German industry in the 1920s, and although his general model of the movement applied to the automotive industry, the sector was in poor health in the later years of the Weimar Republic. Germany's slow development of the industry left the market open for major American auto manufacturers such as General Motors who took over German company Opel in 1929, and the Ford Motor Company which maintained the successful German subsidiary Ford-Werke, beginning in 1925.[2]
The collapse of the global economy during the Great Depression in the early 1930s plunged Germany's auto industry into a severe crisis. While eighty-six auto companies had existed in Germany during the 1920s, barely twelve survived the depression, including Daimler-Benz, Opel and Ford's factory in Cologne. In addition, four of the country's major car manufacturers — Horch, Dampf Kraft Wagen (DKW), Wanderer and Audi — formed a joint venture known as the Auto Union in 1932, which was to play a leading role in Germany's comeback from the depression.[3]
The turnabout for the German motor industry came about in the 1930s with the election of the Nazi Party to power. The Nazis instituted a policy known as Motorisierung ("motorization"), a transport policy which Adolf Hitler himself considered a key element of attempts to legitimise the Nazi government by raising the people's standard of living. In addition to development and extensions of major highway schemes, the Volkswagen project was also conceived to design and construct a robust but inexpensive "people's car".
By the end of World War II, most of the auto factories had been destroyed or badly damaged. In addition, the eastern part of Germany was under control of the Soviet Union, which dismantled much of the machinery that was left and sent it back to the Soviet Union as war reparations. Some manufacturers, such as Maybach and Adler (automobile), started up again, but did not continue making passenger cars. The Volkswagen production facility in Wolfsburg began making the Volkswagen Beetle (Type 1) in 1945, a car which it had intended to make prior to the war (under the name of KdF-Wagen), except that the factory was converted to military truck production during the war. By 1955 VW had made one million Volkswagen Beetles, and by 1965 had built ten million. Other auto manufacturers rebuilt their plants and slowly resumed production, with initial models mostly based on pre-war designs. Benz resumed production in 1946 with the pre-war designed 170 series. In 1951 they introduced the 220 series, which came with a more modern engine, and the 300 series. Opel revived the pre-war cars Opel Olympia in 1947 and the Opel Kapitän in 1948. (Tooling’s for the Opel were taken by the Soviets and used to make the Moskvitch 400-420.) Ford, which had resumed production of trucks in 1945, began building the pre-war Ford Taunus in 1948. Porsche began production of their Porsche 356 in 1948, and introduced their long-lived Porsche 911 in 1964. Borg ward began production in 1949, and Goliath, Lloyd, Gutbrod, and Auto Union (DKW) began in 1950.BMW's first cars after the war were the luxurious BMW 501 and BMW 502 in 1952. In 1957 NSU Motorenwerke re-entered the car market.
No other country in Europe can boast a comparable concentration of auto- related R&D, design, supply,
manufacturing, and assembly facilities. Accordingly, no other country in Europe provides the same
market opportunities as those offered by the German auto industry.
The auto industry in Germany thrives as a result of the diversity of companies active in the sector: large
and medium-sized auto manufacturers alike are to be found in Germany, as are system and module
suppliers, not to mention numerous small and medium-sized tier 2 and 3 suppliers. In fact, around 85
percent of auto industry suppliers are medium-sized companies. All of these suppliers provide up to 70
percent of value added within the domestic auto sec- tor – ensuring that the German auto industry
remains at the forefront of the competition
According to the A.T. Kearney For- eign Direct Investment Con?dence Index 2012, Germany is the most
attractive FDI destination in Europe. Internationally participating busi- ness executives also conclude
that ongoing investment in sustainable business is an absolute imperative for successful market
competition and shareholder satisfaction. The UNCTAD World Investment Report 2011 confirms
Germany’s reputation as one of the most attractive busi- ness locations in continental Europe. Ernst &
Young fnds Germany to be the most attractive investment loca-tion in Europe in 2012 with its Standard
report Deutschland 2012 - Der Fels in der Brandung? (A pillar of strength in troubled times?)
international manager study. American interview partners also singled out German R&D – and
partnerships with Ger- man universities and research cen- ters – for speci?c praise. German R&D
excellence is held in such high esteem that a number of US com- panies have established their own
research centers here – many of them with global reach.
Auto Location
Within the context of the interna- tional economic downturn, the German automotive industry has
done remarkably well. According to Ernst & Young’s European Automotive Survey 2011 of senior auto-
mobile manufacturer and supplier decision makers, Germany is the world’s most competitive
automobile production location. In European comparison, Germany has used the global downturn to
build on its lead as an investment location.
Germany has the highest concentration of all European automotive OEM and tier 0.5 supplier R&D
centers. This makes the country the most important automotive development activity location in
Europe. German- based suppliers and service providers profit from close client interaction starting from
the pre-development stage. They can take advantage of joint research activities with some of the
world’s leading automotive technology research institutes and universities.
Numerous innovation clusters integrate industry, science and education in automotive-related areas
including mechatronics, microelectronics, mechanical engineering, manufacturing processes, and
material sciences.
No other industry invests as much in R&D – around EUR 19.6 billion in 2011 alone. As such, the auto
industry in Germany accounts for more than one third of the country’s total R&D expenditure.
Moreover, auto manufacturers and suppliers located in Germany are among the world’s leading patent
applicants. Around 3,650 patents per year make the German auto industry the world patent champion –
no other country registers as many auto industry patents
1. Increasing competition from China and India
2. EU Emission Regulations
a. 130 grams of CO2 per kilometer to be met by 2012
b. Only 6 German-made models meet the target
c. Hybrid Cars - competitive advantage
3. Ernst & Young Study: Germany needs to double its efforts in R&D in order to keep its
leading position
4. Shifting Focus (Similar to Computer Technology):
a. Branding and Marketing; Engineering and Design will belong to Major Companies
that survive the competition
b. Production of components and final assembly will migrate (possibly to former
car-making companies)
Based on the above facts and finding we conclude that Automobile industry in the
Germany is in Growth Stage of Industry Life Cycle. To sum- up following are the
various reason in support of the statement:
1. Currently, six German companies dominate the automotive industry in the
country: Volkswagen AG, BMW AG, Daimler AG, Dr. Ing. h.c. F. Porsche AG, Adam Opel
AG and Ford-Werke GmbH.
2. Nearly six million vehicles are produced in Germany each year, and approximately 5.5
million are produced overseas by German brands
3. Germany is one of the top 4 automobile manufacturers in the world.
4. The Volkswagen Group is one of the three biggest automotive companies of the world
5. The Chevrolet Volt and its Voltec Technology have been invented and developed first
and foremost by the former German Opel engineer Frank and—still today—some of the
most important parts of the development of GM's electric vehicles is done in Germany.
6. The automotive industry is the largest industry sector in Germany. In 2011,
the auto sector recorded turnover of EUR 351 billion – around 20 percent of
total German industry revenue.
7. German passenger car and light commercial vehicle manufacturers recorded foreign
market- generated revenue of EUR 194 billion for the year 2011. For the same period,
domestic market- generated revenue of EUR 80 billion was created.
8. The automobile industry is one of the largest employers in Germany, with a workforce
of around 712,500 in 2011.
9. Germany is Europe’s number one automotive market in terms of production and sales;
accounting for over 30 percent of all passenger cars manufactured and over 20 percent
of all new registrations.
10. Germany also hosts the largest concentration of OEM plants in Europe. There are
currently 47 OEM sites which are producing for major auto brands.
11. German automobile manufacturers produced more than 12.9 million vehicles in 2011 –
equivalent to 17 percent of worldwide production.
12. Germany is the European car production leader: some 5.9 million passenger cars (and
more than 439,000 trucks and buses) were manufactured in German plants in 2011.
13. Around 77 percent of cars produced in Germany in 2011 were ultimately destined for
foreign shores.
14. Germany’s automotive sector is the country’s most innovative industry sector,
accounting for 33 percent of total German industry R&D expenditure of EUR 59.2
billion.
15. R&D expenditure for 2011 was EUR 19.6 billion – helping Germany consolidate its
globally leading position in the world economy.
16. R&D personnel within the German automobile industry reached a level of just over
89,000 in 2011.
17. In marked contrast to other European countries, Germany’s unit labor costs continue to
fall – decreasing by a yearly average of 1.2 and 1.5 percent respectively for the year
2010. In 2011, unit labor costs rose a modest 1.2 percent.
The Automotive Industry in Germany (Issue 2010/2011)
http://en.wikipedia.org/wiki/Automotive_industry
http://techshristi.com/
http://en.wikipedia.org/wiki/Automotive_industry_in_Germany
