Pit stop test 2

(a) (i) market share of passenger cars of Asian brand origin in

china saw an overall decrease with both Chinese and Japanese
brands decreasing prominently. Where as western brands
experienced an overall increase in market share.
(ii) Many of chinese auto makers produce poor quality cars
and have uninspiring marketing and an inefficient industry.
Furthermore, china has roughly twice the number of brands
and models that the US has, the crowded chinese automaker
field makes it virtually impossible for individual home grown
companies to create unique identity and build loyalty among
customers.
(b) Market equilibrium quantity is determined by the intersection of
the demand and supply curve of the goods. As hundreds of millions
of rural chinese move to cities to seek jobs housings and cars there
will be an increase in demand for cars and thus will affect the
market equilibrium the extent of change in equilibrium quantity of
cars can be examined via the use of price elasticity of supply
concept
with more people moving to the cities there will be a higher demand
of cars ceteris paribus,
with reference to the diagram, an increase in demand for cars will
cause the demand curve to shift from D0 to D1 as illustrated in
figure 1. At original equilibrium price P0, there will be a shortage of
Q0Q1. As quantity demanded Q1 exceeds quantity supplied Qo of
cars. This results in an upward pressure on price as consumers are
willing to offer a higher price. As suggested by law of supply, when
price increase, quantity supplied will increase as more producers
would enter the market as they are more incentivized to produce
cars due to higher profit margin, as illustrated in the movement
along the supply curve from point
The extent of increase of equilibrium quantity can be determined via
magnitude of the PES of the cars in china.
PES of the car can be said to be less than 1, meaning price inelastic.
It takes a long time to produce cars and requires a lot of materials to
produce the car, thus the complexity level is considered high, the
producers are not able to respond to the change in demand quick
enough,
Also the availability of materials could also hinder the production of
cars
Thus PES inelastic, therefore sales volume of cars will be less than
proportionate relative to the change in price.
Figure 1.

(C)Perfect competition.
Large number of small firms many sellers in the market such
that each is producing an insignificantly small portion of total
industry supply, thus individual firms have zero market power.
Types of products sold by the automobile manufacturing
industry in china is homogeneous and of similar quality, no
branding and advertising thus products are perfect substitutes
for one another , thus firms demand is largely affected by
price factor
(d) marketing strategies?
Given the increasing competition from chinese car
manufacturers and their foreign joint venture partners vieying
for car buyers attention, companies would need to engage in
mergers to increase market share and reduce competition.
Thesis
(1)Firms can participate in horizontal integration, allowing
from economies of scale to be reaped. The car
manufacturer firm would be able to enjoy technical
economies of scale, to tackle the high fixed costs, extract
3, by spreading the fixed costs over larger output levels
and lowering cost of production.
(2)A merger can also allow the firm to enjoy financial
economies of scale. larger firm with a higher sales volume
will be able to be more credit worthy due to more assets,
thus banks are more willing to offer loans and extend
credits, tackling the problem of chinese automakers being
young and untrusted

2.InternationalCompetition.Mergerscanhelpfirmsdealwith
thethreatofmultinationalsandcompeteonaninternational
scale,byincreasingmarketshareandhavetheabilitytoremain
financiallyviable.Thefirmscanalsopartnertobuildanenginee
together,shareanassemblyplant,orcollaborateonanew
platformormodelthroughmergers,asmarchionneexplained
thathighfixedcostandinvestmentsinglobalautomobile
businessdictatedthatafulllinemanufacturermusthaveatleast
sixmillionunitsofsalestoremainfinanceiallyviable.

Anti thesis
However, internal economies of scale might result in strained
relationships between the company and workers, it would be
increasingly difficult to ensure that the welfare of all workers
are met, especially workers at the lower end of the hierarchy,
there may be low morale and loyalty and an overall fall in
productivity levels,
Given the strategies that the chinese car manufacturer can
adopt to avoid extinction