Presentation of the topic
Australia is one of the few countries that are capable of scraping and manufacturing in significant volumes. Australian car manufacturing and the Australian economy as a whole play an important role in the Australian automotive industry.
Australian automotive manufacturing (AAI short) can be divided into two interconnected sectors: the manufacturing (manufacturing) sector and the car Sales (or import) sector, both of which are equally important to AAI's full performance. among which Australian manufacturing companies compete, producing vehicles and related products, the main purpose of which is to maximize profits. On the other hand, the sales sector refers to market conditions in which the representative sales of cars are compete with the sale of cars and related products, which serve the same purpose as undertakings in the first sector.
It is very important to distinguish between the two sectors within the AAI as two different market structures, business strategies, competitive conditions etc. To analyze these market structures, two economic models should be developed, each of the A.A.I.
1.1. Analysis of Manufacturing Sector
A.A.I., this oligopoly has only one market structure that best describes market conditions in the manufacturing sector. Since only two organizations in Australia produce cars in Australia and these are Ford and Holden, competition policy and pricing strategies are between these two organizations. The next economic model will help to determine the competitiveness and economic conditions of the Australian automotive market.
The first important feature of the oligopoly is that it should be noted that competitors' prices are "sticky", which means they are less likely to change than any other market structure. This statement will be described in more detail later when we develop the Game-Theory model, as this is a very important concept of competition. The second most important feature is that if prices change, companies are likely to change their pricing policy. These two characteristics can increase competition in the market. Companies are trying to reach out to the rivals' price changes or ignore them. However, this depends on Game-Theory, which is explained in more detail
However, the current market conditions of the automotive industry in Australia and the actions of the Australian government exacerbate competition and pricing opportunities for market companies. Manufacturing and maintenance costs for manufacturing in Australia are already high and rising, mainly due to the lack of economic resources and technological advances. That is, since Holden and Ford are trying to compete, as prices are usually "sticky", they will be forced to concentrate on technological advancements and marketing. Both business lines result in high costs. Furthermore, the Australian Government has made it clear that it is unwilling to provide additional support to the automotive industry on the market. All of these factors have a negative impact on the competitiveness of both companies. In other words, increasing costs with lower revenue leads to lower and decreasing profitability levels.
Profitability and competitiveness levels are closely related to the oligopolistic market structure as these are the two most important factors in the competition policy pursued by companies. When we say that a firm's competitiveness level is very low, we mean that the company can not effectively respond to any price changes or changes in competition or even change production costs. This can prevent the company from competing for pricing and competition because it is not able to influence market competitiveness at all. The company can then be exposed to an external threat and can be pushed out of the market or even worse if production is stopped and bankrupt.
1.2 – Model of Oligopoly Game Theory
The game theory model is explained in the oligopolistic market structure of companies' pricing and competition policy. You can also show the different competition policies that are based on the two companies' pricing, High and Low, as mentioned above. Each market participant follows the Game-Theory model in this market structure, though this is certainly more detailed than our example when trying to predict competitors' pricing and the movement of competition and monitor the level of competition in market level and market share. But how is this happening?
For example, suppose there are four different fields, all of which are divided. These fields represent the pricing strategies that Holden and Ford can use during the tournament series. Fields A and C represent Holden's high pricing policy while A and B are a high pricing policy for Ford. Finally, Fields B and D represent Holden's low-priced policy, while C and D are a low-priced policy for Ford. When both companies decide to follow a high pricing policy, they will allocate $ 12 million in profits. If Holden decided to go to a low-priced policy, he will have a maximum $ 15 million profit, while Ford's profitability will drop to $ 6 million. Exactly this may be the case, even if both companies have opted for a low-priced policy, they can realize a profit of up to $ 8 million.
From the example above, it can be stated that the oligopolistic competitive markets rarely change their pricing policy, as this may have a negative impact on their level of profitability. However, Holden and Ford, the Australian automotive industry, focus on two different companies, product differentiation and marketing. That is, they try to compete with the distinction of their products, for example, by manufacturing vehicles with different characteristics or producing on technological advantages. Marketing plays an important role here, as it is the most important tool that delivers and connects the customer with the product. For example, if Holden introduces new driving technology that improves driving experience and safety and produces this technology in a newly designed vehicle, it is likely that Moon will effectively differentiate its newly designed vehicle from Ford's relative vehicle and attract more customers into the store . Holden may also use marketing techniques to make this technology available to the public in the form of knowledge; so try to increase sales without changing the price policy. However, it is important to state that this new technology can lead to higher production costs if not properly evaluated; so Holden can only rely on increasing its market share to gain more profits. However, the sales part will be further analyzed in the next chapter of the report
. Game theory is not just a theory for the automotive industry in Australia but a fact. It shows us that Australian automakers have based their competitive strategy on all of the above-mentioned factors and as far as possible on pricing strategies. They can advertise that they have low prices, but in fact their prices are very stable. If we look at the Holden or Ford websites, we identify that there is a huge product range and every company competes. However, new market conditions have changed significantly earlier, as car makers think about the future, and may change their pricing and competition policies or even determine their existence on the market.
2.1 – Import / Sales Analysis Sector
While car makers operate in an oligopolistic market structure, import and sale vehicles or relative products are different. Import and sale of vehicles is the second and important business sector in the Australian automotive industry. There are a number of different car sales companies, and only primary sales should be taken into account, since second-class sales are generally not included in economics, and more specifically in GDP measurements. If there are not many entry barriers at all, then the industry has difficulty accessing it, but someone who is interested needs to take into account the high costs of automotive dealerships. Every business in this market is primarily based on product differentiation and prices are not "sticky", pricing competition is created by a market mechanism and is generally not considered a regular phenomenon. Finally, cost analysis and cost management play a very important role. All of these features relate to the Monopoly Competition Market Structure. In this market structure, we focus on two phases, short-term and long-term phases, each with different competitive characteristics and outcomes.
An important factor is that here we have to say that when developing in the automotive manufacturing sector, the cost of selling to the dealer may increase. This is always pending depending on whether the vehicle is manufactured in Australia and when it was produced overseas under what economic conditions it was made. Prices may be "sticky" for manufacturers, although prices in the sector will be much easier if needed. Here, companies change their pricing policy if costs rise or fall, and this always depends on the market mechanism. The amount of competitiveness and the degree of price elasticity of demand depends on how many competitors must face the monopolistic competitor.
In such a market the following situation is very common: a situation, run and long term:
At this stage, the venture is experiencing economic benefits. This fact will, however, bring to the market new companies that can compete with profits.
The Second Phase
The economic losses indicated in this section leave a large number of firms out of the market because they are not in a market condition
At the final stage, the market ends or steady. Since all the companies required to exit the market have done so, the market mechanism ends up where companies do not receive any economic gains / losses. This is the point where the market is the most stable.
When studying this situation, we can recognize a very important fact for any monopolistic competitive company in the Australian automotive industry / sales. That is, in this market structure, in the long run, companies only realize normal profits and the market mechanism finally reaches a point of equilibrium. In the long run, companies tend to compete with product differentiation. In the short term, however, companies may gain economic gains or losses, causing companies to enter the market or exit the market and "show" the companies in competition and when they apply pricing competition policies.
Australian The automotive industry is experiencing difficult market conditions, primarily because there is no state subsidy; although competition and profit maximization are still possible. Thinking about overseas movement is not always a good choice for manufacturing companies, as the Australian economy needs the processing industry, as it accounts for a large proportion of GDP.
Market conditions for competition are well-defined for all manufacturers or car dealers, so any business on the market should have competitive market access to market share and profitability or stabilize their level of profitability. In any case, these most important goals are almost any market type of any profitable business in any market structure. However, every business has to define a functioning market structure so it can clearly define its goals, strategies and policies. The market mechanism is always responsible for the above strategies and for the majority of cases responsible for pricing policies or for pricing and marketing strategies.
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