Saic Motor and Mg Motor

INTRODUCTION

About SAIC Motor and MG Motor

UK based MG Rover was one of the oldest car manufacturers in the world. The company headquartered in Birmingham, United Kingdom, and a wholly owns subsidiary of SAIC Motor UK, which turn is owned by the Shanghai-Based SAIC Motor. It designs, develops, assembles and markets cars sold under the MG marque (MG, 2005). The marque returned to competitive motorsport in 2012, and won the 2014 British Touring Car Manufacturers Championship. The company had to be nationalized to save it from bankruptcy induced by labour unrest and financial problems. Therefore, this is the fact that MG Rover only went into administration upon the collapse of its proposed joint production venture with the Chinese firm Shanghai Automotive Industry Corporation (SAIC) (BBC, 2005).

SAIC Motor in China is the largest automotive, so now it wanted to expand in UK, Europe and try to set a European manufacturing plant in UK, and use the existing facility that is in UK.

There are two aspects of environmental assessment that are undertaken is the Marco-environmental analysis makes use of the PEST model and the micro-environmental analysis Michael Porter’s 5 Forces.

Marco-Environment 

1. PEST Analysis

1. Political

MG Rover is discerning the unlawful from the unethical. (Appendix 1)

If current public hostility to the EU remains, it might look as if withdrawal is likely. According to Merrick, J (2015), Prime Minister are urging him to hold the vote on the same day as the local and European elections on 5 May 2016. Therefore, if the UK withdraw from EU it does effect. Because as Preston, A (2015) said, “look at the motor car industry, it’s entirely foreign owned with a lot of it Asian money and there are investing in UK because they have completely unfettered access to the EU”. Most of the time, the voters who want to leave the EU comfortably outnumber those who want to stay in. The gap seems to have been widening again. (Kellner, 2015). The possibility of UK voting to leave the EU is very real (Sjolin, 2015). This is bad news for SAIC expansion plan to Europe since there will be no EU benefit provided for UK in the future.

1. Economic

The currency rates in China and UK now is (1GBP = 9.77 Chinese yuen renminbi). The interest rates in buying car in UK would not be affected even though it has an increase in buying car every quarter movement. The average vehicle on a 3 years finance contract plan or CPC. The interest rate rise would just over 100 pounds to the cost. So it would not affect customer to continue buying a car in UK. For SAIC Motor will also be affected on the promoting and selling car in UK. Government and business leader keen to invest heavily with the new models to grow MG around the world start with Europe as a main target (Gibbs, N 2011). “SAIC Motor Corp, owner of MG Motor UK, has already spend 1 billion pound in resurrecting MG and spend around 2.2 billion pounds to boost MG and Roewe sales to 700,000 by 2015”  (Appendix 2)

The current economy in UK till May last month the GDP growth is 2.5 lower then April 0.1 percent. Based on the Graph 1 below showing the GDP in UK. (UK Government, 2015). Therefore, the current economy in UK is declining. It is affecting the MG Motor, because during the marks 26 consecutive months of growth as GDP continues to pick up, the inflation falls and wage levels improve but until 2015 it getting downward again.

[pic 1]             [pic 2]

[pic 3] (BBC, 2015)[pic 4]

The UK car manufacturing defies export challenges with years of growth in 2014. The cars manufactured in UK in 2014 is 1.2% increase on the pervious years and is the best years since 2007 (Hawes, M, 2015). The Graph 2 above show CPI and RPI in UK inflation from march 2005-May 2015. The Consumer Prices Index (CPI), rose to 0.1% in May, up from -0.1% in April. The transport costs helped the UK’s inflation rate turn positive in May after one month of negative inflation (BBC, 2015). SAIC Motor and MG Motor get affected by the inflation of CPI. MG Motor hits is new record in April 2015 as the best registrations since MG Motor UK was formed it because of the service , can let the customer to try before buy and the impressive design (MG UK, 2015).

1. Social

Customer Targeting

Given the limited size of the current MG Motor market, it was immediately apparent that business world have to be captured from different market segments. Main driver profiles such as marital status, children in the household and multi-car households became a focus of attention. The other market segments and identifies the following as the key target audience:

• Stylish People
• 25-45 years of age
• Demographic profiles ABC1
• Single or childless couples
• 70% male and 30% female
• More than one car in household

Although it was expected that enthusiasts would show interest in the MGF, this was regarded as a smaller market in term of sales potential. As from MG website said that the category above is mostly purchase through their preference on buying car.

1. Technology

Now in UK many other automotive company already have different kind of electric hybrid car such as plug-in electric and pure electric car. The sales of electric car is increasing start from the year 2011-2014 is more or less already increase 1000% from the car registration in UK (UK Car Sales, 2013). As Gibb (2011) reported, MG Chinese owners target the MG Motor car buyer in buying new models car that can be compared with Toyota, Ford, GM and etc. Nowadays, the environment had been polluted seriously one of it is come the CO2 and CO from petrol and diesel transport. It better for SAIC Motor and MG Motor to start invent more new electric to help to save environment.

Micro-environmental

1. (Michael Porter’s 5 Forces)

1. Threat of new entrants

Within the automobile industry, the threat of new entrants is particularly low. These reasons are all tied to the concept of barriers to entry; namely, the obstacles that make it difficult to enter the market and restrict competition. As for new entrants also need to use a lot of money so SAIC Motor also did not plan to have new entrants now. The greatest barriers to entry in the automobile industry is the extremely high amount of capital that is required to purchase physical manufacturing plants, raw materials, as well as to hire and train employees. Research and development is an integral part of automobile manufacturing. New technologies are constantly being discovered that improve the quality of automobiles on the market as well as reduce costs throughout the manufacturing process. (Anon, 2013)