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The great change in the political, economic, technological, social, and cultural environment has altered the manner in which most trade and commerce is carried out. Changes in these indicators have occurred over the previous decades to boost global trade. For example, most developed and developing countries have been adopting rules and regulations to promote international trade. It was clear that international trade leads in an enhanced supply of a wide range of goods and services to clients at reasonable prices. Furthermore, it is through international trade that a country can dispose of excess production while also earning foreign exchange from the exchanges. In the recent years, globalization has been bolstered by intensified creativity and innovation. With the increased increase in innovations, most companies mass produce quality products which compete globally.
Globalization redefined the management practices and production activities (Memedovic 2008). This postulation implies that most companies espoused effective management and productive measures that can position the firm at the high notch in the international market. This paper, therefore, expounds on impacts of globalization on the automotive industry in the United Kingdom and the United States. Specifically, the focus is accorded to the current change in the industry taken to encourage these companies to invest in the home country than doing it internationally significantly.
The recent history of the automotive cluster’s in the United States and the United Kingdom.
In the past, the automotive industry has applied clustering strategies which consequently intensified the level of technological know-how among the members. In the automotive industry, clustering was common because companies used to depend on each other’s that operated beyond the borders but dealt in the production of similar products to sharpen their competitive. Apparently, executing a project increases the chances of success (Delgado et al. 2010). The most important factor to note is that the clustering in this industry involves four major players. These include the motor vehicle manufacturing, motor vehicle parts manufacturing, the engine and turbine producers and the motor vehicle body manufacturers. A conflated effort of these parties guarantees the production of effective and safer vehicles to be purchased and used by customers.
The United States
Besides, the US actively ventured in the automotive industry in the 1890s. The vehicles were produced in the masses and were initially sold in the local markets. After some time, the domestic market started shrinking which necessitated selling the vehicles in other parts of the world. The US automotive industry is dominated by three major manufacturers. These manufacturers include the General Motors, Chrysler, and Ford (Mechler 2007). However, these companies currently face stiff competition from the foreign owned businesses that have also invested in the United States. Globally, the US holds the third position in the production and sale of motor vehicles. Its market share in the world was outfitted by China and Japan whose models have taken the lead in the world market because of the range of advantages gained from using their vehicles. The US as a sustaining economy has well-developed automotive clusters, and appropriate interfacing of the four highlighted clusters in the industry can enhance to the supply of any requisite for the manufacturing of modern vehicles (Alfaro and Tella 2009).
Currently, the US has gone a further step in the automotive cluster industry. The industry is presently driven by creativity and high-technology inputs. The industry has shifted from just manufacturing vehicles and incorporated vehicle manufacturing technology (Kim et al. 2012). Some of the considerations under this initiative include connectivity, fuel consumption, safety, and safety. Most of the research and developments are currently conducted in the Midwest which manufactures about sixty percent of the vehicles made in America. The other automotive cluster centers are situated in Tennessee, Carolinas, and Virginia which have well-established centers to enhance research and development in the industry (Kim et al. 2012). All these initiatives apparently focused on manufacturing the best vehicles to be sold both locally and internationally. The break-through in this sector through clustering remarkably contributed to the success the US motors manufacturers.
The ascent on powers by Donald Trump is anticipated to affect the industry in different ways. The president has already shown the intention of bringing back the investors who have invested outside the US. He feel keeping the major investments and technology in the motor industry will foster economic developments and further preserve jobs for the Americans. He has already alerted companies that had and are still intending to establish major capital investments outside the US to prepare for the increase in tax charged. Since a substantial market for these cars remains in the United States, it thus implies that failing to hit the president proposal will adversely affect the level of sales and further profits of these companies. The rise in tax for the same models of vehicles manufactured outside the US will mean such vehicles will not feature again in the US market to increased prices.
Automotive clusters in the United Kingdom
The industry began in the 19th century. Since then, more developments have been experienced in the industry. Some of the remarkable factors that sparked the development in the industry include favorable government policies that encouraged the participation of foreign investors in the country, promotion of research and development and embrasure of technology in the production of the vehicles. The UK has the best experience that has demonstrated and illustrated the importance of globalization in the automotive industry KPMG (2014). It is, however, agreeable that a vehicle is a product that is purchased using a substantial amount of money. Therefore, replacing a vehicle is not something that can be done daily. It thus becomes imperative to expand the connection internationally. The automotive industry has created employment for many individuals who work in the manufacturing sector, supply chain and transport and distribution sectors which form the sector.
Similar to the US, the United Kingdom has the largest and strongest cluster in the automotive industry. The great development of the industry emanated from the recent investment of foreign motor manufacturing sector in the UK. Some of the major manufacturers include Aston Martin, Honda, Bentley, Ford, Jaguar, JCB, Land Rover, CAT, Toyota, etc. The strong clusters established among key players have enhanced the supply and access to primary inputs and labor. Furthermore, it has boosted sharing of technology through undertaking joint ventures in research and development (Mira Technology Park 2017). As a developed nation, some of the industries took proactive measures of investing in foreign countries to take advantage of cheap labor and also stay closer to the customers. The current UK pre-exist from the European Union implies that it want to limit the number of foreign investors who have been investing in the UK which was favored the terms of the European Union. Exiting the institution will negatively affect some of the investors from the UK who have invested in other countries. As a result, the only best place for them will be the UK itself (The Sun 2017).
The current Theresa May industrial and strategic development plan significantly indicates increased government involvement in industrial plans. The automotive industry is the one already spotted to have substantially invested in foreign countries. The current modern industrial strategy aims to underpin increased foreign investments by its citizens. Instead, it is seeking to focus on building a self-sustaining economy where every citizen can reap the maximum benefit which indeed hinders globalization (The Guardian 2017).
Michael Porters theories on clusters and new economic competition
The intensified technological innovations have, however, discredited the notion that being closer to the supply of particular factors of productions culminates to a comparative advantage. Continual creativity and innovations have simplified the way materials can be sourced from one place to the other. Also, labor can be moved from one continent to the other, unlike the 18th century where transport and cultural barriers hindered the movement from one location to the other. Besides, Michael Porter defined clusters as geographic concentrations and interconnectedness of companies in a particular field that is critical for a competition (Porter 1998). He denies the perception that a business can be located anywhere and still perform pretty well. Porter further disregards the effectiveness of enhanced transportation and technological breakthrough that has enhanced timely sourcing of any inputs by the click of the mouse to create a competitive advantage. Instead, he advocates the role of clusters in increasing the success of a company. Michael Porter's theory, therefore, justifies the applicability of clusters in promoting the success of a company in any developed economy. However, location considerations remain fundamental, but its plight in enhancing competitiveness has been nullified (Delgado et al. 2010).
Clusters play a significant role in promoting economic development in a country. Firstly, clusters promote both competition and cooperation. Plausibly, it is through stiff competition among companies that produces similar products that quality and mass production can be achieved. Mass production of quality and standard products intensifies trade. The customers can get the best quality, and the surplus is exported to the foreign markets. Additionally, there will be an element of cooperation among the industries and other institutions (Porter 1998). Consequently, the cooperation between the key players in the industry will spark mass production of quality products that can be sold globally hence earning the country foreign exchange. Also, the increased production implies that many people will be involved in the manufacture and distribution process. It thus increases the number of individuals employed to work in the industry (Memedovic 2008). All these collectively stimulate economic development through higher productivity.
Secondly, clusters boost creativity and innovation. It is through innovation that most solutions to current problems are simulated. The innovative culture brings into the company the sophisticated ways of producing products that tally customer’s preferences rather than an isolated company. The increased productivity is for the products that align with customer expectations. A successful company, therefore, generates a lot of profit margin and creates more jobs and as a result, the country will get more revenue through taxes (Eisingerich et al. 2010).
Michael Porter has a different view on how the government should get involved in promoting clusters. His proposition neither supports restricting foreign investments nor increasing tax rates that is proposed by Trump. Instead, Porter suggests that the government should create a favorable business environment that supports the existing clusters in the automotive industries. Some of his propositions regarding the government roles include developing existing clusters, aiding in the supply of quality inputs, formulation of policies that significantly promotes local companies, taking a frontier role in promoting research and developments, providing incentives and subsidiaries to clusters and encouraging cluster formation. These suggestions contradicts the US government plan of taking the assertive measures of ensuring its companies with branches outside the US comes back to manufacture everything from the US (Mill et al. 2008). Doing this will enhance cooperation between the involved industries which will consequently result in the production of quality products which can probably outdo competitors products from other developed and developing nations.
Michael Porters view on current Trump and May governments
Trump and May's governments has a good idea that if appropriately implemented, it can promote economic development, increased job creation and create a self-sustaining in the country. However, the initiatives the US and UK intends to employ to bring about these changes is against Porter's opinion. It, therefore, means that if Michael Porter is given the opportunity to either approve or decline Trumps and May’s current efforts in reshaping the automotive industry, he will indeed decline (Porter 1998). Instead, Porter might advise these two governments to focus on the companies that operate within the United States and the United Kingdom respectively. From statistics, these industries generate a lot of revenue to the government and also create a lot of employment to the people (Kim et al. 2012). Some of Porters his recommendations will include the formulation of favorable policies that supports the formation of clusters. It is through favorable policies that the existing companies can be offered incentives and tax relief. The government should also finance research and development and further offer education to the employees. It is through creativity and innovation that effective production techniques will be unfolded that will increase the quality of products (Porter et al. 2007). Through ensuring that the clusters accesses to any inputs required and are succeeding in meeting customer requirements, those in foreign countries will just realize the need of returning home to enjoy the opportunities offered by the government hence increasing the economic growth and development.
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