The automotive or motor vehicle market continues to expand worldwide with the introduction of new cars and the significant addition of more customers; and the UK market is no exception to this. With the development of advanced technologies and fuel-efficient mechanizations, companies operating on the UK motor vehicle market are making the most of their appeal to customers. In addition, certain external factors have an impact on the way the UK motor market and the companies operate. The UK motor market is controlled by macro-environmental factors, which are not in the control of companies, and also by micro-environmental factors, which can usually be controlled by companies. Both these macro and micro influences can be gathered and evaluated in detail through certain analytical tools. Thus, this report will first carry out a STEEPLE analysis of the UK car market, assessing aspects that are important to car manufacturing organisations. The report will then focus on the microeconomic environment, discuss the UK motor market from the point of view of product, labour and competition, and finally conclude with examples of how HRM is practised in car manufacturing organisations in line with these macro and micro aspects.
When viewed from socio-cultural perspective, cars and other forms of automobiles in the UK market are maximally seen as status symbols and as products that will boosts ones image. That is the reason why the customers are willing to pay huge sums for particular brands. Although, all cars are for transportation, certain brands will have a high price tag, due to their power, efficiency features, technology and importantly their brand name. However, due to slowdown in economic growth, many people “are waking up to the fact that owning” a costly branded car is “not the status symbol that it was once perceived to be.” (Milmo 2011). So, people are not buying cars particularly high branded cars that frequently, and this socio-cultural aspect could also be one of the reasons, why UK car sales fell for the 13th consecutive month. (Milmo 2011).
Updating and incorporating new and efficient technologies is a key aspect of car manufacturing. The consumers all over the world including UK are not only demanding a lot of features and comfortable ride, but importantly fuel efficiency. So, the automobile companies are investing and have to keep on investing heavily in R&D, particularly for the development of fuel efficient options. If this trend continues, it is expected that by 2015, 25% of the vehicles will be high technology cars like Hybrids and cars that run on alternate fuels (Frost and Sullivan 2010). The figure below clearly shows that America and European countries including UK will be the major drivers behind it.
Fig 1: (Frost and Sullivan 2010).
Carbon-dioxide emission from automobiles is considered to be the biggest polluter, damaging the natural environment. Thus, the manufacturers in the UK motor market are looking for alternative green technologies. These technologies include hybridization, more efficient powertrains and alternative fuels, so that “tailpipe emissions have zero impact on air quality emissions by 2030-2050.” (“UK publishes roadmap”, 2011). Another reason for adopting this option is the depleting oil reserves.
Number of emission norms, are being set by the UK government to address the environmental concerns, thus allowing the political machinery to play a role in the macroeconomic environment. Actually, the European countries on the whole have also been passing emission norms (Euro 5 and 6 being the current standards) which the car manufacturers have to comply with. In addition to emission norms, governments impact companies in UK motor market through laws relating to mileage per gallon and importantly passenger safety laws.
As an extension of its political role, UK government has stipulated legal requirements that need to be fulfilled while manufacturing the vehicles including stipulation on safety features, emissions, etc. In addition, the legal perspective will come into the picture, when the manufacturers are taken to court due to some deficiency during after-sales period. Complaints against car companies are continuing to grow in a strong manner, with “UK’s official consumer advice body Consumer Direct” reporting there is “growing awareness…increasing willingness among consumers to complain when they buy unsatisfactory goods or receive poor service” (“Car complaints continue to grow”, 2008).
When one considers the UK motor market from an ethical perspective, it is clear the many car companies are orienting their functions in an ethical direction. That is, with the government backing the scrappage scheme, under which the clients can dump their “old, fuel-inefficient vehicles for new models which produce much less pollution,” many car companies are coming up with fuel efficient cars, thereby ethically managing their operations. (“Automobiles Industry”, n. d.).
When the UK motor market is viewed from the microeconomic perspective of product market, it is clear that it mainly functions as an assembled product market, with minimum indigenous involvement. That is, UK motor market is currently dominated mainly by the foreign companies through their subsidiaries, with the few British companies like Morgan and Rovers coming out with only few exotic product models. As Hanlon (2011) states in 1950 UK was the world’s LARGEST exporter of motor vehicles, but now the wholly UK-owned firms, export just a handful of exotics. So, if one views the UK motor market from a critical perspective, it gives the feeling “Why there is no British car industry”. However, the fact is, only when viewed from indigenous product perspective the above view arises, because many well known product brands operate in the UK market. Among these brands, the smaller cars with good fuel efficiency are the ones which have high demands, and that is applicable in the second-hand market as well. “Data from the AutoTrader.co.uk reveals that demand for cars under £1k now exceeds current levels of supply.” (Batchelor 2011). In addition, because of the disparity in the demand and supply of these small cars, the price of these cars has also got inflated.
Although, automation and computerization have become widespread in manufacturing sectors like the UK motor market, the role of human labour cannot be discounted at all. Particularly, the role, skills and the experience of the British Labour force in the automobile sector is one of the key reasons for the development of the UK motor market. As the new study of the All-Party Parliamentary Motor Group (APMG) reports, technical experience and a professional workforce are the key factors why car brands come to the UK from across the job (The future of the UK automobile industry? 2011). However, the issue is the declining labour supply to the UK motor industry, as sizable prospective employees are getting attracted to the service sector. In addition, with the labour cost also on the higher side, when compared to the emerging economies, the companies in the UK motor market are facing issues. Although labour supply could be managed or increased by bringing in more apprenticeships, due to the issue of high labour costs only, many companies are moving out their production to low cost Asian countries. Thus, lower labour costs are generally stated as the main reason for the increase in decentralizing global production into low-labour cost countries, and when the nominal hourly compensation are compared, it shows stark differences. (Holweg, Davies & Podpolny, 2009).
Fig 2: (Holweg, Davies & Podpolny, 2009)
Competitive Structure and Nature of Competition
The latest report from the All-Party Parliamentary Motor Group (APMG) states, “there are more than 40 firms manufacturing vehicles in the UK, with over 3,300 firms supporting the industry as a whole”. (The future of the UK automobile industry? 2011). Thus, the competitive structure and the nature of competition in the UK motor market have been highly saturated. As mentioned above, only few indigenous firms operate in the UK market and that too in a minor way, and so major competition is between the multinational companies. Companies from all over the world through various entry or operative modes including subsidiary, joint venture, etc are operating in UK. Makers from fellow European countries like Germany and France are playing a major role. Although, the Mini-Cooper is being manufactured by the German based maker, BMW, it has become a quintessential British model or even British icon. American car makers like General Motors, Ford and other models are dominating the luxury models segment. Japanese carmakers with sophisticated and fuel efficient vehicles including small cars are also providing intense competition.
Human Resources Management in Car Manufacturing
As pointed out above, one of the main reasons, why UK motor market is able to attract many automobile players and output quality vehicles is because of its skilled and experience labour force. So, this crucial labour force has to be taken care optimally through effective human resources management, so they continue to provide quality output. From the above analysis of the macro and micro environments of UK motor market, two crucial factors could mainly influence the Human Resources Management or HRM function in a car manufacturing organisation. The factors of how companies are mainly going for fuel efficient advanced technology vehicles, and how they are indulging in decentralization to low cost emerging economics due to labour shortage and importantly to cut costs, could have sizable HRM implications, necessitating the companies and even the employees to make necessary changes. Firstly to keep up with the trend of fuel efficient vehicles and related new technologies, companies following apt HRM policies are giving training to the existing employees, and equipping them to handle the increased demand. Through programmes like Train to Gain, the employees in the automotive sector are being trained and equipped with the latest technologies related to fuel efficiency. “Increasing numbers of employees and employers in the UK are benefiting from this…with the funding allocated to the automotive sector through this programme has been increased to 100 million pounds.” (“Government’s response to Business & Enterprise”, 2009). This training of employees on new technologies is carried out with the aid of standardized training processes, formulated by HRM departments. Also, as part of training, mentorship programs are also included with ‘greenhorn’ being taken under the wings of an experience mentor. In addition, this development of fuel efficient technologies by the companies could also create more jobs, thus necessitating more responsibilities for HRM. “The move to greater fuel economy means greater labour content per vehicle and higher employment across the fleet.” (Baum & Luria, 2010). Thus, HRM department in each car company in the UK motor market has to fine tune its recruitment policies to recruit apt employees. Although, each car company have a defined recruitment process, this recruitment of employees with slightly different skill sets, necessitates a slightly improved recruitment process. On those lines, car companies are asking their HRM departments to come up improved or reoriented recruitment policies, which fully tests the technical efficiency of the prospective employees, so that he/she will able to work with all technologies related to fuel efficiency. Thus, it is clear that based on the changes in the external environment particularly the customer’s changing preferences for fuel efficient vehicles, organisations and its HRM departments are aptly responding.
Globalisation has sort of become an important survival tactic for most car manufacturing companies including the ones in UK. Many companies are outsourcing sizable manufacturing processes to emerging economies around the world, and then assembling the manufactured components in UK. That is, as pointed above, in the microeconomic environment of UK, the labour costs of native British employees are shooting up. So, to cut overall manufacturing costs, companies are going in search of countries like China, India, Mexico, etc., where the labour costs are lower, and outsourcing various manufacturing processes to their. When the companies do that, the HRM department has to effectively manage the employees in both in the home operations as well as in the foreign operations. Employees in British operations will be feel aggrieved and threatened that their jobs will also be outsourced, leading to unemployment. In that scenario, it is left to the HRM department only to assuage the employees, give them assurances and make them work effectively. Although, HRM department will give job assurances, they will also explain the real situation and how due to volatile nature of the market, anything could happen, and even if negative things happen, they will be cared through beneficial retirement schemes. Apart from taking care of the employees in their home operations, HRM department also need to effectively manage the employees working in the units, to which the work is outsourced. Although, employees in the outsourced unit could be capable and equipped, the operations have to be overseen by the management or in particular the middle-level management, so that expected quality and output is achieved. This has already happened in the case of the now deceased Rover, with the British Engineers travelling to the outsourced units in Shanghai, China and staying there, guiding the local employees on the day-to-day operations of their various processes. (Taplin, 2007). This aspect of HRM is visible now also, as the automobile companies operating in the UK motor market through their HRM department personally manage the work in the units, to which they have outsourced. Thus, it is clear that various macroeconomic and microeconomic facts impact the functioning of the automobile companies in the UK motor market, even necessitating the companies’ HRM department to indulge in certain type of management.
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