Industry Comparison of the Oil & Gas vs. Luxury automobiles in Canada

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Table of Contents

Introduction
Discussion
Works Cited

Introduction

Description of the luxury automotive industry in Canada

This report seeks to explore the luxury automotive industry in Canada with a focus on comparison with the oil and gas industry. This comparison shall take on a number of factors analyzed in respect of the recent and future developments in these two industries.

The Canadian automotive industry has continued to record tremendous improvements in terms of sales, growth of product portfolio, and overall profitability. Numerous companies dealing with the assembly, marketing, distribution and repair of luxury vehicles characterize the Canadian automotive industry.

The luxury car industry is comprised of vehicles assembled with add-ons at an added cost. They include luxury minivans, convertibles, sedans, and SUVs (Desrosiers n. p).

The luxury car industry includes all vehicles that feature added amenities at an additional cost. The category includes luxury minivans, SUVs, convertibles, sedans. This topic covers news on the luxury car industry, including details on some of the top manufacturers and brands.

The global financial recession continues to shape consumer behavior across the industry. With the rising propensity to consume luxury automotives, the value of money will take a entirely new approach (Desrosiers n. p).

The recent crisis shall leave a lasting effect on the car manufacturers to embrace the value for customers’ money and safety. A recent survey by Deloitte Consulting indicates that firms that prioritize value and safety will remain the most competitive and success in the future.

The industry forecast indicates that the new class of luxury car buyers will dominate in most of emerging markets that shall focus on low-cost, low technology cars compared to the newly established wealthy segment of customers seeking extremely luxurious cars (Desrosiers n. p).

Discussion

Comparison between luxury Automotive industry and Oil & Gas industry in Canada

The luxury automotive is one of Canada’s leading trading sectors with the highest labor force. Over 400 companies dealing in the manufacturing, distribution, sales and repair of the automotives characterize the industry. The industry has proven to be depended upon by several others, including the petroleum, banking, insurance, and shipping industries (Canadian vehicle Manufacturers Association n. p).

Value chain

The country has continued to refocus on the value for cost of luxury automobile products. According to the market surveys, over 80% of Canadians drive to work. This increasing demand for luxury vehicles has been driven by the changing value additional by car manufacturers. There is a general shift from seller-driven pricing models toward customer-centered models aiming at giving value for products (Deloitte 24).

Industry environment

It is evident that the government has played a leading role by creating an enabling fiscal environment for oil, gas and luxury automobile industries. Incremental investment by the Canadian government into boosting the activities in oil and automotive industries has served as a stimulus for their continued success over the past years.

Investment in education, a fair regulatory environment, and the willingness to coordinate with the industry players through various initiatives have served to the growth of oil& gas and luxury automobile industries in Canada (Canadian vehicle Manufacturers Association n. p).

Therefore, the cooperation between the Canadian investment environment and foreign companies brings about a positive demonstration effect. For instance, the recent signing of the major agreement by foreign oil drilling firms to explore the vast oil sands in Canada demonstrates the added advantage due to foreign investment.

Similarly, the recent and most successful assembly Japanese owned plant is situated in Canada. A case of successful industry player brought about by the positive foreign acceptance policies have realized Lexus, the only Toyota’s luxury brand located outside Japan.

These developments continue to be stimulated by the competitive advantages brought by strategic partnerships between foreign and domestic firms across the oil and luxury automobile industries (Deloitte 24).

During the last three years, the luxury industry has experienced a drop in the overall sales of about 4000 units annually. Several factors have contributed toward this extended drop in the market sales. The dealer network issues that account for the problems of penetrating the market competitive luxury automobile market have affected the industry.

Research reveals that a loss of brand equity mostly influenced by General Motors (GM). GM’s luxury car brands such as Hummer, Cadillac, and Saab have dropped in market share for the past five years. This problem is a pure example of how a single leading company can influence the market trends in an industry.

The total GM’s luxury automobile industry recorded a decline from 15,000 units sold in 2005 to 6,100 units in 2009. This dramatic decrease in production and sales of luxury by GM has affected the luxury market scenario in Canada (Canadian vehicle Manufacturers Association, n. p).

The vehicle manufacturing sectors assembly continues to become more global, and global surveys indicate that it will become more expansive in the end. This means that Canada will be needed to fast truck its luxury industry elements to cope with the global trends being witnessed across the world.

The changing global automobile issues remain a challenge to most automobile industries in the world. Issues such as environmental sustainability, hanging customer needs and competition, increasing cost of fuel and oil products are some of the challenges facing the automobile industry.

Key Success factors

The increasing demand for luxury vehicles in Canada accounts for the ever-growing luxury automobiles. Research into Canada’s automotive market reveals that the demand has continued to rise with a steady rate of about 12% over the past decade.

The advances in roads infrastructure in Canada have played a motivating role for the increasing overall demand. On the other hand, the manufacturers have realized the need for a high-quality product portfolio that appeals to the needs of the customers.

For instance, the cost of the product has continued to receive a weak emphasis from the customers. The customers’ focus is on safety and economic efficiency of the products as contrasted to the historical focus on the pricing of products (Canadian vehicle Manufacturers Association, n. p).

The luxury automobile industry in Canada has invested enormous funds in research and development (R& D) to cope with the changing market demands.

Analysis of the industry shows that dealing in luxury automobile demands for high capital investment to drive the market. Therefore, to meet the changing market environment, most players in the market have resorted to utilizing their resource capabilities to outperform their immediate competitors.

Critical to the industry success has been the competitiveness of each of the original equipment manufacturers (OEM’s) in Canada. Although the industry continues to witness a significant challenge in respect of growth, it has lied on the players’ competitive drives.

This trend among the players in the industry continues to spur the industry’s slow, but steady growth. There are several well-structured supply chain networks in Canada, which has facilitated the speed of product distribution to the domestic and global market (Canadian vehicle Manufacturers Association, n. p). The success of the industry depends on the robustness of the distribution channels. They facilitate a company’s need for a wide market share.

The efficient and most powerful luxury dealer network adopted by the luxury industry players has served to boost the overall market share, sales returns, and profitability of the luxury automobile companies in Canada. The BMW’s success has been driven by the adoption of a strategic networking system utilized by the company owing to its need to outperform Mercedes Benz.

This strategy has made BMW emerge as one of the most successful luxury automobile companies in Canada, North America, and on the global market (Industry Canada n.d.). This success has remained phenomenal to the point that most companies have adopted the model of strengthening their supply chains across the country and the world market (Deloitte 24).

The strategic brand identity sort by most companies in Canada has led to the growth of image stores for the past few years. This step has enabled most companies to split their distinct brands from their sister brands. This has continued to boost their annual sales and increased profitability.

Canadian firms and the government have adopted a friendly investment approach that appreciates import OEMs as trade partners. This step contrasts with the US’s aggressive policies that discourage global players from entering and conducting business in the country.

Therefore, adoption of non-aggressive policies has helped the luxury automobile industry to gain from the competitive advantages brought by foreign players (CVMA n. p). The Canadian assembly sector has remained dominated by foreign investors, which continues to increase its trade image across the world (CVMA n. p).

Compared with the oil and gas industry, numerous similarities define the relationship between the domestic and foreign players. The ability of foreign oil companies from the Middle East and other countries to invest freely in the oil and gas industry is in consonant with the trends in the luxury automobile (Deloitte 24).

The country is slowly becoming one of the leading centers for research, design, and development of vehicles in the world. Although the country has recorded a slow growth in the automotive industry, its steady growth continues to provide a basis for a robust future for the industry (Deloitte, 12).

The government, industry players, and stakeholders in oil& gas and luxury automotive industry have focused on investing heavily in R& D, human capital and capacity building. Research shows that over $1.5 billion has been invested in the Canadian intellectual capital over the past five to six years. However, this figure remains little compared to the estimated $100 billion invested in intellectual capacity across the North American region (Deloitte, 11).

The aspect defining growth of both oil & gas and luxury automobile industries have been the increasing investment in human and intellectual capital for the past decade (Deloitte, 6). This aspect is the fastest growing in the luxury automobile industry compared to the rest of the industry components.

Challenges facing the luxury automotive companies require proactive and strategic steps to redeem the declining market share of the luxury automobile industry in Canada. One of the key steps will be to res-size companies dealing with luxury vehicles in Canada.

The US based firms realizing tremendous market success have applied this approach. For instance, GM is undertaking this radical shift to recover its glory that has been lost for several years.

The increasing cost of production of luxury vehicles in Canada continues to pose a significant threat to the success of industry players (Deloitte, 6). There is a need for restructuring of the cost structures, especially on the Labor contracts.

This trend resembles the environment in the oil and gas industry, which continues to witness a considerable challenge in terms of increased cost of production. The two industries have experienced a continuous increase in the costs of production due to the increased pressure on fuel costs, environmental concerns and changes in customer needs.

Works Cited

Deloitte. A new era accelerating toward 2020- An automotive industry transformed: 1-27.

Desrosiers, Dennis. The Luxury Vehicle Market in Canada, 24 (2010): 3.

Canadian vehicle Manufacturers Association (CVMA). The Automotive Industry in Canada. Web.

Industry Canada. The Canadian Automotive Industry. n.d. Web.<http://www.ic.gc.ca/eic/site/auto-auto.nsf/eng/Home>

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