Introduction to the Topic
Australia is one of only some nations with the capabilities to design cars from scratch and manufacture in considerable volumes. Car sales in Australia are also an important element with the Australian Automotive Industry along with the Australian Economy in total.
The Australian Auto Industry (A.A.I. in short) may be divided into two interrelated sectors, the Production ( Manufacturing) sector and the Car Sales (or Import-Sales) sector, both equally vital for the total efficiency with the A.A.I. On one hand, the Manufacturing sector refers towards the industry circumstances beneath which Australian Manufacturing companies compete, by generating vehicles and related items, using the key aim of maximizing income. However, the Sales sector refers to the market circumstances beneath which car representative sale companies compete, by the sale of cars and associated products, having the identical aim with organizations inside sector one certain.
1.1-Analyzing the Manufacturing Sector
There’s only a single market structure that can ideally describe the marketplace conditions within the Manufacturing sector if A.A.I., this is Oligopoly. As you will discover only two organizations that generate cars in Australia, and these are Ford and Holden, the competitor’s procedures and pricing tactics are based between these two organizations. The following economic model shall assistance define the competitors and economic conditions for the Australian Automotive Manufacturing market.
1.2- The Game-Theory Model for Oligopoly
The Game Theory model is used to clarify the pricing and competition policies of firms in an oligopolistic industry structure. Furthermore, it may show a couple of unique competitors’ policies based on pricing that the two firms can stick to, which is Higher and Low as stated above. All firms in this market structure comply with a Game-Theory model, even though it is certainly additionally detailed than our instance, within the process of attempting to forecast competitors’ pricing and competitors’ movements as well as retain track on the competitors’ levels in the market and market place location share. But how does this occur?
2.1- Analyzing the Import/Sales Sector
When the automakers are thought of to become operating in an oligopolistic market structure, importing and promoting autos or relative items is often a unique story. The import and sale of cars would be the second and equally important business sector in the Australian Automotive Industry. There are several diverse car-promoting firms and we shall only take into consideration first-hand sales, as second-hand sales, in general, are not incorporated in economics and more especially in GDP measurements.
Lastly, cost analysis and cost management play an incredibly important part. All the above characteristics refer to the Monopolistic Competitors Industry Structure. Within this market structure, we are going to focus on two phases, the short-run phase and the long-run phase, each with different competitors’ traits and outcomes.
In such a marketplace the following circumstance is very common, a scenario that helps us distinguish amongst short-run and long-run:
Stage A single
Within this stage, the firm experiences economic profits. Nonetheless, this fact will draw new firms inside the industry causing the income to have competed away.
The economic losses indicated in this stage will cause quite a few firms to exit the industry, as they can not keep selling below these market situations.
In the final stage, the marketplace clears-up, or reaches an equilibrium point. As all firms that necessary to exit the market have accomplished so, the market mechanism comes to the point where no economic profits/losses are realized by the firms. This is the point where the industry is most steady.
Market competitor’s conditions are well defined for every manufacturer or car dealership, hence any business inside the industry ought to utilize the available to them competition techniques and achieve larger industry share and profitability level or stabilize its profitability levels. Either way, they are the principal targets for just about every profit-motivated business in any marketplace form beneath any industry structure. On the other hand, every single business ought to define the industry structure that is operating in, so that it may then clearly define its targets, tactics, and policies. the marketplace mechanism is in all situations accountable for all of the above approaches and many of the instances responsible for establishing pricing policies or indicating pricing and advertising techniques.