ECON90015 Economics Case Study Sample

ECON90015 Economics

Economics – Case Study

GENERAL INSTRUCTIONS (please read carefully)

1. The assignment contributes 30% to your final mark in this subject. It will be marked out of 40 possible marks.

2. There is a total word limit of 2,000 words for the assignment: 1,500 words for Part A and 500 words for Part B. The word limit does not count tables, diagrams, footnotes, and bibliography. Marks may be deducted if the assignment is too long.

3. The assignment must be uploaded as a single file to LMS by the deadline (8 October, 5pm). Penalties for late assignments apply. Please remember to keep a copy of your assignment.

4. Unless you have an APA, extensions are NOT granted by the subject’s lecturers or tutors. See the instructions for requesting an extension in the subject outline.

5. All figures and graphs should be drawn digitally wherever possible. We accept scanned graphs that are drawn by hand as long as they are drawn clearly and labelled appropriately. Any graphs must be submitted as part of the assignment in a single document. DO NOT print your assignment, draw the graphs, and then scan it:
Turnitin will not accept your submission and you will risk accruing late penalties. Instead, scan your graphs and merge them with the main text of your assignment into a single file.

6. The submission system automatically collects your name and identifying information so do not include a cover page with your assignment. Do not include the prompts for Part A or Part B in your assignment: it is enough to label your answer to Part A with “Part A” or “Case Study,” and for Part B with “Part B” or “Essay.” It does not matter what name you give to the file you submit. When uploading to Canvas, do not write anything in the comment field.

7. Start thinking about topics as early as possible!

8. We expect that your topics and approaches will differ substantially between the two parts of the assignment. This should be clear from the prompts: Part A asks you formally analyse a market, while Part B is much more informal and concerns an every-day phenomenon of your choice. Do not write the same essay twice and just change the question.

9. Maintain academic integrity by avoiding plagiarism and collusion. Familiarise yourself with the university’s policy here. Students, whose assignments are assigned a high similarity score by Turnitin indicating plagiarism, will be referred for an academic misconduct investigation and may face disciplinary action.

Case Study

Choose an Australian industry and analyse the most important factors affecting its profitability by using the relevant concepts and theories we have studied in Lectures 1-8 (or from future lecture topics if you like). You should choose the three or four most-important factors influencing profitability. You can choose factors that are currently affecting your chosen industry, or factors that seem likely to affect the industry’s profitability in the near
future. Some possibilities to consider are:

• Internal rivalry and the market structure: Which market structure best describes the market (i.e. perfect competition, monopoly etc.)? Why? Things to consider here are the nature of the firms’ output (homogenous vs. heterogeneous), barriers to entry, “price- taking” vs. “price-making,” and market concentration (a small number of large firms vs. a large number of small firms). Provide measures of industry concentration if you can. Do you have reasons to believe that the market structure is likely to change in the future? Is the struggle for market share and increased profitability reflected mainly in price competition or in non-price competition? If it is non-price competition, what form does it take?

• Barriers to entry: Are there barriers to entry in your chosen industry? That is, is it difficult for new firms to enter or is there free entry? Have any significant new firms entered the industry in the recent past? Consider how brand loyalty, economies of scale, intellectual-property law (e.g. patents and copyrights), and government regulation can each contribute to barriers to entry.

• Substitutes and complements: Are there important substitutes and complements (in consumption) that could affect industry profits? You can consider related products that are either currently available or might soon become available.

• Bargaining power of buyers: Is the input of your chosen industry bought by few large buyers with market power or a multitude of price-taking buyers with no market power?

How does that affect profits? Have producers made relationship-specific investments with their buyers?

• Bargaining power of suppliers: Is the market for inputs in your chosen industry concentrated or competitive? Here, you can choose to consider the markets for labour, land, raw materials, and capital. How does the relative concentration in that market affect input costs, and how can input costs affect your chosen industry’s profits? Have the producers in your chosen industry made relationship-specific investments with their input suppliers (for example, moving their factory close to a supplier’s business)? Can the supplier exploit this situation and how would that affect profitability? Are there substitute inputs that producers in your chosen industry can turn to?

• Costs: What sort of cost structures do the firms in the industry face? Do the firms face any economies/diseconomies of scale, scope, and/or learning? How are these cost structures likely to affect firms’ relative sizes or their profit-maximising decisions?

• Technological change: Have there been significant technological changes affecting profitability in the recent past, or are any such changes likely in the future?

• Government policy: How does government policy affect the industry? Are there likely to be changes in government policy in the future that may affect the profitability of the industry?

• Price discrimination: Do firms in your industry engage in price discrimination? If so, how do they do it, and what enables them to be able to price discriminate successfully? What type of price discrimination is it? How important is price discrimination for profits? If price discrimination is currently impossible but was possible in the recent past (or will be possible in the future), discuss how these (expected) changes affect profitability.

• Elasticity of supply/demand: The determination of whether supply and/or demand are relatively elastic or inelastic would often be important when considering the other factors listed above. Still, if you believe that certain factors can change the elasticity of supply or demand in your industry leading to changes in profitability, feel free to discuss them separately.

• COVID-19: Has COVID-19 benefited or hurt the industry’s profitability in the short run, and why? Is that effect likely to last even after the pandemic has been brought under control? Is the industry likely to undergo long-term changes as a result of the pandemic?

What do COVID-19’s effects on the industry tell you about its structure?

To summarise, in this case study you should:

• Introduce and define the industry that you will analyse;

• Briefly describe the first factor you will study and analyse it to determine how it affects the industry’s profitability. Where possible, provide evidence;

• Perform the same steps with the second factor you are considering;

• Perform the same steps with the third and fourth factors you are considering (if there is a fourth  one);

• Provide any concluding remarks;

• Add a bibliography, collecting all references cited in the text. (Use the 7th -edition

American Psychological Association style, also known as APA 7th citation style. Our library’s excellent citation guide is here.)

The main factors considered in marking will be:

a) Research: For example, does the essay display sound and extensive research of the
industry chosen?

b) Knowledge of economic concepts: Has the essay used the appropriate economic concepts? Does the essay show a thorough understanding of those concepts?

c) Quality of the analysis and application of economic concepts: Is there a logical and thorough supporting argument or description of how conclusions have been drawn?
Have economic concepts been applied in an effective manner? Are the assumptions clearly described? Is an understanding shown of any relevant qualifications to the conclusion?

d) Presentation: Has the industry been properly defined and identified? Are the writing style and organisation of material such that the main ideas and arguments can be understood? Note that diagrams are often useful for illustrating key economic models and concepts.

Solution

Part A- Case Study

Introduction and defining chosen industry

This particular report will appropriately evaluate the current condition of the Australian automobile industry by evaluating it with the aspect of manufacturing, importing, distribution, retailing, servicing as well as logistics and transport. As per the MBA Assignment Expert, The report will also evaluate some of the potential factors of profitability that appropriately affect the profitability rate of the automobile industry in Australia. The major purpose of the report is to analyze some effective challenges including rising labor costs, increasing competition from import vehicles, and how these challenges appropriately affect the profitability concern.

Describing internal rivalry and the market structure and determining how it affects the industry’s profitability

Internal Rivalry
 

Figure 1:  Car ownership scenario by brands in Australia
(Source: Statista, 2023)

According to Statista (2023), car ownership by brand found that Toyota takes the top spot while Volvo is at the other end of the ranking. Three major car manufacturers in Australia are considered Holden Ford and Toyota. Some of the newly developing car manufacturing organizations are introducing different types of vehicles such as electric vehicles as well as specialized vehicles. Some examples of this kind of car manufacturing organization are ACE EV Group, Brabham Automotive, etc. ACE EV Group is a Melbourne-based company that is effectively developing and manufacturing a range of electric vehicles trucks, vans, etc. Brabham Automotive is also involved in manufacturing a range of high-performance supercars and sports cars. From the scenario, it can be evaluated that the number of internal car manufacturing organizations is high in number and involved in introducing different types of cars supporting effective innovation. The internal rivalry in the Australian automobile industry can affected by several factors such as The number in size of firms in the industry, the degree of product differentiations, barriers to entry and exit, the cost structure of firms in the industry, and the competitive strategies of the firm in association with the automobile industries Australia (Global vehicle lightweighting, 2023 p1 (1)). From the scenario, the internal driver has and significant impact on the industry profitability in terms of increasing market share and increasing profit ratio by effective several profitability factors such as price, advertising words, new product development, etc. 

Market Structure

Oligopolistic Market:

The market structure in association with the automobile industry is considered an oligopolistic market which means there are quite a few large firms that are dominant in nature in terms of controlling the automobile markets of Australia in association with public interventions (Bortolomiol et al. 2023 p2(2)).  Some of the biggest automobile organizations in Australia are Toyota, Hyundai, Kia, and Mazda. Some of the major factors that are appropriately responsible for the oligopolistic market structure of the Australian automobile sector industry are associated with the high cost of entry into the automobile industry; the large economies of scale are large in this sector, the strong brand loyalty that the majority of the consumers are very particular about their choice able brand.

Nature of firms output

The Australian automobile industry is more heterogeneous in nature than homogeneous which means there are a variety of different types of firms available in the industry with different size structures, as well as strategies 

Barriers to entry

High cost of entry in the automobile industry it appropriately makes difficulty for new forms to enter into the market so the barriers to entry are high (Juliano et al. 2022 p2 (2)).

Price taking vs. Price making 

The Australian Automobile industry is considered a price-taking industry which means the available companies in the industry have little control over the prices of their product.

Market concentration

The automobile industry of Australia is majorly dominated by a small number of large firms.

Profitability Recommendations considering internal rivalry and market structure

● Increasing the level of product differentiation

● Investing in innovation

● Getting assistance from the government support

● Appropriately focusing on targeting the niche of the market

Describing Substitutes and complements and determining how it affects the industry’s profitability

Substitute

Substitutes are products or services that can be used instead of a particular product or services.  Some of the effective substitutes for the automobile sector industries of Australia include public transport, bicycles, walking, ride handling services, car sharing services, etc.

Complements

Complements are kinds of products and services that can be able to use in conjunction with another product or service. Some of the appropriate complements especially in Association with the Automobile sector industries in Australia include fuel, maintenance, parking, insurance, etc.

Substitutes and complements affecting the profitability of the Australian automobile industry

● Substitutes generally reduce the profitability of the Australian automobile industry by effectively reducing the demand for automobiles for example if the cost of public transport is low and convenient the majority of the consumers will be less interested about buying a car.

● Complement can increase the profitability of the Australian automobile sector industry by appropriately increasing the demand for auto mobiles for example if the cost of the full will be low majority of the consumers may be interested in buying cars for their daily life transportation.

● The automobile industry is appropriately facing an increasing level of competition from the substitute because ride-hailing services, as well as car-sharing services, are increasing in number by offering convenient as well as affordable pricing options to consumers.

Profitability Recommendations Consider substitutes and complement 

Some of the appropriate recommendations for the purpose of increasing the profitability by appropriately considering substitutes and complements the automobile sector organizations can be able to take some measures regarding-

● Focusing on different types of products and services such as electric vehicles

● Focusing on the complements such as partnering with insurance companies and affordable offering discount rates.

● Investing in innovation regarding developing self-driving cars

Recommendations Implemented by The Manufacturers

Tesla

The leading manufacturer of electric vehicles Tesla has established a network regarding providing convenient pricing for electric vehicles by developing self-driving cars (Iliff, 2023 p1(1)). 

Toyota 

One of the major automobile manufacturers of Australia is Toyota has effectively partnered with insurance companies by offering discounted price rates to the consumers (Collins Ngwakwe, 2023 p1(1)).

Describing Technological change and Determining How It Affects the Industry’s Profitability 

Significant technological changes

The development of advanced technologies and their potential impact on workers is not a new topic in the business world. Innovation is viewed as an embedded “capitalism” feature and is most important for monetary renewal. In areas of production, advanced technologies are being used to lessen costs by limiting labor input while increasing levels of production. Even though technological advancements in the automobile industry of Australia have been benefiting from this development, there seems to be an urgent requirement to understand the changes caused by technologies to ensure jobs for people. It is to be noted that with the development of a number of policies on digital transformation, this particular aspect of the automobile industry demonstrated the characteristics of upgrading and it has given rise to a macro-level strategy. However, in terms of practical implementation, there are some issues such as a lack of specific direction of development, insignificant performance, etc (Men et al. 2023, p2 (2)).

The digital production transformation is linked with Industry 4.0 technologies. Technologies such as data analytics, collaborative robots, simulation, and 3D printing have been providing key advantages to the automobile industry of Australia. For example, Toyota Australia has been applying the famous “Toyota production system” in a blend with connected technologies in order to effectively coordinate the secure, smooth, and safe transit of customers (www.toyota.com.au 2023).

Changes likely in the future 

The Australian economy has been continuously dependent on the effective goods and people movement which is why the automobile sector plays an important role for the nation. The increasing connectivity offered by the internet, and the capability of measuring and monitoring every activity has been providing the Australian automobile sector to enhance productivity. It is to be noted that ITS “Intelligent transport system” of progressive deployment is estimated to be the key driver of increased productivity within the automobile industry of Australia. In addition to this, ITS can gain productivity via just-in-time delivery, savings of cost, and efficient intermodal transport. 

Impact 

Strong customer demand blended with increasing purchase power has been encouraging the underlying vehicle demand in Australia with the recovery of the market to the pre-COVID levels. , challenges linked to disruptions of the supply chain, and materials shortages are some of the risks that might be faced by this industry. In regards to this, The theory of firm assumes that the firm wants to “maximize profits” and the output amount is dependent on the input amount. There are two production factors: capital and labor. Capital means physical capital that needs to be goods itself for example robots, machines, computers, etc. Taking this into consideration, the Australian automobile industry needs to strategically invest in this physical capital that is emerging technologies to gain maximum benefits for the firm. The theory of the firm states that “knowledge-based resource” such as an increased focus on creativity and innovation, is a significant contributing factor towards gaining sustainable competitive benefit (Kengatharan, (2019), p1 (1)).

Conclusion

This report has significantly evaluated Some of the major factors affecting the profitability scenario Australian automobile industry such as internal disease and market structure, substitutes, and complements. This report has also focused on how the technological change As impacted the profitability scenario and the automobile sector of Australia.