Impact Of Brexit On Uk’s Automobile Industry Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Impact Of Brexit On Uk’s Automobile Industry Case Solution

These trade barriers will increase the manufacturers’ cost of production and ultimately the product price. Earlier, EU ensured the availability of automobiles at fair prices without any monopoly or price cartels. Now, the industry will be facing competition domestically and the product prices will increase too for the end customers. According to SMMT, the Brexit would lead to European Union tariffs, which increase the imports cost by 2.7 billion pounds and exports by 1.8 billion pounds. Similarly, Jaguar Land Rover claimed that the Brexit could cost the company 1.2 billion annually (Polymer medics.com, 2020).

Social

The Brexit is expected to reduce the demand for the automobiles by the UK’s motor industry, as it would reduce the market from different classes of customers, across the European Union Countries. The recent studies have showed that the young population is declining in the United Kingdom and the older population is rising, which raises the concern for the automobile manufacturers as now the manufacturers won’t be having a frees access the young population target market, available in the European Union Countries.

Technological

Earlier, before the Brexit, the UK’s automobile manufacturers acquired talent and capital without trade barriers at affordable prices. But the Brexit is expected to impose non-tariff barriers including border delays and a costly access to qualified workers. The SMMT report states in the UK’s automobile manufacturing sector, 10% people are employed from the European Union counties and currently there are 5000 vacancies, which cannot be filled with the domestic labors (Zhang, 2017).

Environmental

Nowadays, the consumers from the overall world, has raised their concern about a healthy environment, which derived the demand for eco-friendly product by the automobile manufacturers. The report by SMMT revealed that the Brexit without negotiations minimizing the trade tariffs would severely impact the ability of the manufacturers to produce the next generation environment friendly and zero emission cars and vans (BBC.Com, 2020). It is because the WTO (World Trade Organization) tariffs would cost the automobile manufacturers in UK by roughly 55.4 billion pounds with annual production declining by 1 million units.

Legal

The legal aspect of Brexit on the UK’s economy underlies the imposition of tariff and non-tariff trade barriers. In tariff barriers, the exports and imports of the UK’ economy will affected adversely. It is because due to legal trade barriers impositions, the manufacturers’ imports cost for spare parts will increase, which would increase the automobiles’ prices for the customers. Additionally, the non-trade barriers including the security checks, border limits and costly access to talent will also lead to lower productivity by the automobile manufacturers.

Porter’s Five Force Analysis

Power of Suppliers

The Brexit would create challenges for the UK’s automobile manufacturers, as they used to import the spare parts from the European Union Countries by enjoying free trade barriers. But now after the Brexit, the manufacturers will have to find suppliers dealing in negotiable prices of the spare parts. This mean that the suppliers in the domestic as well as the international market, will possess a high power over the UK’s automobile manufacturers.

Power of Customers

The power of customers will be high as they have knowledge about the products offered by the other European Union countries and since the products offered by the domestic producers will become expense, there are more chances for the buyers to switch brands.

Threat of Substitutes

Due to the expected increase in the automobile’s price in the UK’s automobile industry, the customers demand for the automobiles is foretasted to decline as due to affordability, the customers will shift towards the substitute mode of transportation i.e. they could opt for public transportation vehicles, as it costs less.

Threat of New Entrants

The threat of new entrants for the automobile industry will remain low, as there exists very large player in the industry. The entry barriers including capital investments and technology are very high, which resist the entrances of new players in the automobile industry. Moreover, due to Brexit, the foreign direct investment from the European Countries will be halted, which could also reduce the threat of new entrants.

Existing Rivalry

The rivalry between the existing players in the industry will increase as the prices will become high and the market will be concentrated more towards the domestic economy. In order to grab market shares, the automobile manufacturers will have to follow a low-cost strategy or a differentiation strategy in order to remain competitive in the industry.

Conclusion

Brexit refers to the UK’s decision, in a referendum on June 23, 2016, of leaving the European Union, which, took place on January 31, 2020. The decision to leave European Union was put in referendum, with 51.9% voting in favor of the exit and 48.1% against the Brexit. Recent studies have showed a negative consideration about the impacts of Brexit on the UK’ economy. It is because the Brexit is expected to give rise to different uncertainties related to the immigration policies, foreign investment, trading in services, negotiation processes etc. In order to survive the challenges created by Brexit, the UK’ government need to maintains free trade agreements without tariffs and non-tariffs impositions, with other countries, so that it could reduce the effects of Brexit over the UK’s economy..........................

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Impact Of Brexit On Uk’s Automobile Industry Harvard Case Solution & Analysis