Relationship Between Market Structure and Innovation

Discuss about the Relationship Between Market Structure and Innovation.

Introduction

This study is based on the case study of Holden, which was one of the highest performing companies in the Australian car industry. As per the case study, the industry is operating at a standard level in the market of Australia (Abc.net.au 2016). However, the government of the company has decided to stop investment in this industry further.

Holden was the largest car manufacturing company in Australia. The company had a strong customer base. The people in Australia preferred to use the cars of Holden. At the same time, the employees of the company were satisfied to work in this company (Holden.com.au 2016). However, due to the change in government’s decision, the company decided to stop the manufacturing, which brought several problems to its employees.

The study aims to analyze the problems that the employees of Holden have faced after the shutdown of the company. At the same time, the study also indicates the possible alternative ideas that the management at Holden could have implemented other than shutting down the manufacturing unit. Apart from this, the study also states how the management of Holden could have use the critical reflection in their managerial foresight in order to remain competitive in the market of Australia. Along with these, the study also shows how innovative thinking could have saved the business of Holden.

In the case study of Holden, it has been identified that the company was the largest car manufacturer in the market of Australia (Abc.net.au 2016). The company was owned by Australia and due to that, most of the people in Australia used to prefer buying the car of Holden (Barnes 2016). However, due to the change in government’s decision, the investment in the Australian car industry reduced and the management of Holden decided to stop manufacturing the car (Abc.net.au 2016). Due to this, many people, who were working for Holden, became jobless and the country faced huge unemployment.

However, in the case study, it has been identified that other than stopping the car manufacturing, management of Holden had other options available (Abc.net.au 2016). The management of the company did not analyze the external environment properly, which can be understood if the case of Elizabeth city is conserved. Elizabeth was a planned city. The city had everything except proper job opportunity (Doshi et al. 2016). The city was properly linked with the other parts of the country through proper transportation. At the same time, in the city enough human resource was available. However, the management at Holden did not look at this area for their business. Elizabeth had human resource and enough space for business development but no employment opportunity was there (Stanwick, Circelli and Lu 2015). Therefore, if the management at Holden took the decision of establishing their business in Elizabeth city, then they could have got more investment and the people in Elizabeth could get the employment opportunity. Moreover, the existing employees at Holden would not lose their jobs.

This indicates that the management at Holden did not analyze the external environment or external opportunities properly, which could have helped the company avoiding the disclosure of the company (Valadkhani and Smyth 2016). The management of the company could have taken different strategies like, expanding the business more in Elizabeth by reducing the investment in the existing manufacturing unit. Hence, from this discussion, it can be said that external environmental scanning is very important for operating a business organization successfully.

The management at Holden had stopped the manufacturing of the cars due to the decrease in the investment by government of Australia in the car manufacturing industry. The government thought that there are many other industries, which provides enough return to the government’s investment. Analyzing the government’s decision and steps, the management of the company decided to close the business in Australia (White 2015). However, the decision of the management of Holden indicates that there was lack of enough critical reflection in the managerial decision of the company.

If the management of Holden would critically analyze the external and internal environments of the company, then they could have found out that there were other opportunities of maintaining the competitive advantage in the market (Bamber 2015). The management of the company could have analyzed the internal strength of it. The company had efficient human resource team, which helped the company to become one of the largest car manufacturing companies in Australia. However, the management of the company did not focus on its human resource (Soosay et al. 2016). On the other side, as the company had earned enough amounts of revenue as well as profit in the years before the business closure, the company already had enough financial strength. This means the company could have used that money and expanded its business in Elizabeth city, where much business opportunities were available.

In this context, Hashmi and Biesebroeck (2016) have stated that the decision taken by the management of Holden was right to some extent because without proper support from the government of the country, it would not be possible to run the business properly. However, Hannigan, Cano-Kollmann and Mudambi (2015) argued that the management of the company could have shifted their manufacturing unit to Elizabeth city. On the other side, the management of the company could have also diversified their business. If the company could have diversified its business, then there was possibility that it could have got the support from the government of the country. Though, Frederickson (2015) commented that diversifying a business requires much investment and other opportunities, which is not possible to achieve in one or two years. In this context, White (2015) mentioned that if the company diversified its business, then the existing employees of the company would not lose their jobs and at the same time, the market hold of the company would stronger.

Therefore, from the above discussion, it can be said that the management at Holden failed to critically analyze their actual strength that would help the company remaining competitive in the Australian market and the company could have avoid the business closure.

Barnes (2016) stated that innovation is the most important factor behind the success of a company. In support of this, Valadkhani and Smyth (2016) stated that innovation makes a company different than the other companies and this is the main reason for which the people or customers prefer to use the products and services of the innovative company. If the particular case of Holden is considered, then it can be said that the management of the company could have bring more innovative products in the market. For example, the company could have brought innovative model or could have used the some innovative technology that cause less carbon emission or pollution (Stanwick, Circelli and Lu 2015). If the company had brought this type of innovation, then it could attract more people towards the products and services of Holden.

In the case study, it has been identified that the people in Australia mostly prefer to buy the car that is manufactured by the Australia owned company. Holden was the major Australia owned companies in the car manufacturing sector. Then with the help of innovation, it could have maintained its business properly in Australia (Bamber 2015). At the same time, the management could have brought innovation in the promotional strategies so that it can increase its sales and provide more tax to the government. If the company would provide more tax, then it could get support from government’s end.

Apart from innovation, the entrepreneurial orientation is another important part of a business. The capacity of the entrepreneur taking risk, bringing innovation and pro-activeness are very important for the success of the business. In case of Holden, the management could have taken a risk of new investment in Elizabeth city (Soosay et al. 2016). It has been identified before in the discussion that there were opportunities in Elizabeth, but the management of the company did not take the risk of new investment. However, if the management had taken this risk, then it could have made the company stronger than before. On the other side, pro-activeness of the management could have helped the company achieving competitive advantage in the market of Australia (Doshi et al. 2016). Holden was already a giant car manufacturing organization in Australia. Therefore, it could have used its financial strength to move its future towards the positive direction. The company could have increased its production and expanded its business in the other areas in Australia as well as in the other countries (White 2015). It could have proved itself as the market leader in the can manufacturing industry in Australia.

Therefore, from this discussion, it can be said that innovation and entrepreneurial orientation are the most important factors that the management of Holden has ignored while taking their decision of closing down the business. If the management would have focused on these two factors then the situation might be different.

Conclusion

In this study, it has been identified that Holden was the largest car manufacturing company in the market of Australia. The customer base of the company was at satisfactory level. However, due to the change in the government’s decision regarding support or investment, the management of the company decided closing down the business. The study has identified that the management of the company could have changed the situation if they conducted proper scanning of the external environment. At the same time, the study has also identified that there was lack of critical analysis of the situation and the strength of the company. The company could maintain its competitive position, if it critically analyzed its strengths. Moreover, there were also lacks of innovation and entrepreneurial orientation in the business.

Reference list

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Barnes, T., 2016. Transition to where?: thinking through transitional policies for Victoria's automotive manufacturing industry.

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Frederickson, R.M., 2015. A New Era of Innovation for CAR T-cell Therapy. Molecular Therapy, 23(12), pp.1795-1796.

Hannigan, T.J., Cano-Kollmann, M. and Mudambi, R., 2015. Thriving innovation amidst manufacturing decline: the Detroit auto cluster and the resilience of local knowledge production. Industrial and Corporate Change, 24(3), pp.613-634.

Hashmi, A.R. and Biesebroeck, J.V., 2016. The relationship between market structure and innovation in industry equilibrium: a case study of the global automobile industry. Review of Economics and Statistics, 98(1), pp.192-208.

Holden.com.au. 2016. Holden Australia - Discover New Possibilities. [online] Available at: http://www.holden.com.au [Accessed 27 Dec. 2016].

Soosay, C., Nunes, B., Bennett, D.J., Sohal, A., Jabar, J. and Winroth, M., 2016. Strategies for sustaining manufacturing competitiveness: comparative case studies in Australia and Sweden. Journal of Manufacturing Technology Management, 27(1), pp.6-37.

Stanwick, J., Circelli, M. and Lu, T., 2015. The End of Car Manufacturing in Australia: What Is the Role of Training?. National Centre for Vocational Education Research (NCVER).

Valadkhani, A. and Smyth, R., 2016. The effects of the motor vehicle industry on employment and research innovation in Australia. International Journal of Manpower, 37(4).

White, L., 2015. The motor museum of popular culture: Presenting the national story of'Australia's own car'. CAUTHE 2015: Rising Tides and Sea Changes: Adaptation and Innovation in Tourism and Hospitality, p.771.

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