The case of Holden

Executive Summary
The Government of Australia funded $500 million each year to automotive
manufacturing industry in Australia. However, Australian car manufacturing industry
faces a serious uncertain future. In the present day, Australia manufactures only
225,000 motor vehicles. This is an industry that relies heavily on the economies of
scale and it is of prime importance to achieve cost competitiveness, however it is
the current volume that is extremely disappointing. This also curbs investments in
enhancing technologies in car manufacturing such as advanced robotics. Also with
the historical rise in the Australian dollar exchange rates, the industry is suffering
from competitive pressure in terms of cheaper imports and export competitiveness.
Also there are several protectionist policies in many significant and important export
destinations that stand to hamper the exports. For example, despite the very
successful Thailand-Australian Free trade Agreement, the Thai Government imposes
a non-tariff duty. This makes the territorys price in Thailand severely unattractive.
This article discusses the various environmental factors that Holden needed to scan
and the critical reflections to hone its managerial foresight to deal with the
problems and also the need for innovative solutions to the problem.

Contents
Executive Summary.................................................................................................... 2
Introduction:............................................................................................................ 4
Industry Overview:.................................................................................................. 4
Organization Overview:........................................................................................... 4
Q1. Explain how external environmental scanning could have alerted Holden to
change its business strategies and avoid business closure in Australia?...................4
Q2. How critical reflection can bring forth managerial foresight for Holden to
remain competitive in their business in Australia?..................................................6
Q3: Critically analyze how innovative thinking and intrapreneurial orientation could
have saved the Holden Manufacturing Group............................................................7
Conclusion.................................................................................................................. 7
References.................................................................................................................. 8

Introduction:
Industry Overview:
Ford Motor Company of Australia was the very first car manufacturer company in
Australia and Holden is credited to have introduced the first Australian designed
mass produced cars. By 2004, the number of cars manufactured in Australia had
reached to 4 million. Australia has also been known largely for its design and
production of large sized passenger cars. However, by 2009 the total number of
cars manufactured in the country dropped down to 175,000 and majority of the cars
were brought in from Asian countries and European Countries.
Currently, the Australian designed cars are manufactured by a subsidiary of the
General Motors, namely Holden. Toyota Australia is the contributor of the local
variants of the various international models under its brand, example Camry.
However, Ford Australia has decided to close all its engine and vehicle plants by
October 2016 and the same will soon be followed by Holden and Toyota Australia.
This kind of a shutdown will have severe implications.

Organization Overview:
Holden was started as a saddler business in South Australia. Today it is one of seven
fully-integrated global General Motors operations that build, designs and sells
vehicles all over the world. Holden has its It has its headquarter in Port Melbourne,
Victoria, with an vehicle manufacturing operations in Adelaide, South Australia, an
engine manufacturing plant on-site.
The Holden Vehicle Operations (HVO) have been able to produce close to 44 models
and has been derived from six body styles and two architectures. All of these are
used for either domestic or export customers. Holden produces the Commodore
range of Sportwagon, sedans and Ute and along with Caprice luxury vehicles for the
Australian market.
Holden is among the nine global design centres of General Motors and also holds
the world centre of expertise in design for General Motors on a global footing. It is
responsible for vehicles such as Chevrolet Camarao and Commodore. It also designs
various global concept cars.

Q1. Explain how external environmental scanning could

have alerted Holden to change its business strategies and
avoid business closure in Australia?
It has become extremely difficult for companies to retain their production of cars in
Australia. Supporting their decisions to shut down, Ford, Holden and Toyota have
come up with several factors that have forced them to take the step. It is these
factors that define the external environment that should have been well researched
and
necessary
alerts
should
have
been
made.
One of the factors that Holden should have well deliberated on was the rising
Australian dollar. This issue has hugely disabled the export scenario in Australia
hurting several opportunities, especially for Toyota and Holden. There are more than
50 automotive brands that are competing for a pie of the million-vehicle market.
The high production and wage costs have also contributed in making the car market
fragmented.
The Australian government has funded an amount to the car manufacturers that lies
between $500 million and $1 billion annually. This has led to a financial struggle for
the local car manufacturers. Holden itself was profitable for only two times; between
2005 and 2012.
Holden should have also scanned the competitive landscape. Ford in May 2013 had
declared that it was in plans to stop the local production of the large Falcon car an
also the territory SUV in October 2016. This had some serious implications on the
critical automotive parts supplier base in Australia which performed its business
with Holden and Ford.
Another environmental scanning that should have been performed by the Holden is
the political landscape. It should have critically analyzed the implications or the new
rules and policies that could have affected or favored the automotive industry.
Earlier the Tony Abott led coalition government that entered into the Septembers
federal election promised to provide a fund assistance of $500 million to the
automotive manufacturing industry. Ian Macfarlane who is currently the Federal
Industry Minister of Australia discussed about the deliberations the government has
undertaken with Toyota about its future assistance to support the company in
building cars. However the negotiations were soon stopped in their tracks.
Moreover, Holden should have realized this at a very early stage that being a car
industry it is a complex and extremely expensive business. The renewed Commodores
reception in the Australian market should have been properly scanned.
Another aspect that Holden should have focused into and looked out for are the effects
and impacts free trade agreement with South Korea and Thailand. The free trade
agreement especially with South Korea is a big issue to think over by the Holden
organization. The small, fuel efficient car Cruze that was built alongside Commodore in

the South Australia was actually originated from General Motor/s Daewoo division. The
same is also built in South Korea.
Also given the competitive landscape in the small car segment of the Australian market,
Holden has been losing out on its money on every vehicle that it manufactures in
Australia. Upon the implementation of the Free trade Agreement, sourcing cheaper
versions of smaller cars manufactures at South Korea.
Apart from this, the company should have also analyzed the change in customer
demands, the effect on customers lifestyle and purchase behavior post the increase in
Australias dollar exchange rate and also the various technological enhancements that it
could have adopted to stay profitable.
Thus, political landscape, economical landscape, social landscape and technological
landscape are the areas wherein Holden should have analyzed which could have alerted
Holden to change its business strategies and avoid business closure in Australia.

Q2. How critical reflection can bring forth managerial foresight

for Holden to remain competitive in their business in Australia?
It is important for Organizations going through difficult times or radical changes to
invite questioning on their fundamental way of functioning and business strategies.
A hard critical reflection enables the organization to approach to the problem
through various perspectives, locate and analyze its own shortcomings and work on
them.
In this case Holden, using critical reflection on various aspects, its research abilities,
the technological capabilities, the willingness and flexibilities to adapt to changes,
the way ahead, the economies and even its own understanding of the shifting
market dynamics, political landscape and competitive landscape can enhance its
managerial foresight to remain competitive in their business in Australia.
Holden should first analyze and evaluate its dependency on governments funding
aids and to what extent can it survive without the support and its own capabilities
to generate cash flow and if there are any alternatives. Holden as an organization
was not clear with the amount of dependency it had on the government for the
manufacturing of the new versions of Commodore and Cruze. Initially it had secured
a $275 million assistance sum of funds to manufacture new versions of Commodore
and Cruze post which it needed additional $265 million to carry on with the same
plans. This demand for additional funds came at a time when government had
already declines to offer further assistance.
Another critical reflection will be the impact that the shutdown that can bring on the
lives of the loyal workforce of the organization. As per the Government data, the
total number of Australians who are employed in the local motor vehicle

manufacturing industries and motor vehicle parts exceed 45,000. Almost a quarter
of one million Australians are employed in automotive repair and maintenance,
automotive parts retailing and wholesaling industries. Shutting down will have large
scale implications on the workforce who have been loyally working for the
organization for a long time.
The range of Commodore cars were one of Australias best selling cars for more
than 15 years until 2010. However there has been significant dip in the sales of the
cars. Thus it is imperative to understand the reason behind the dip in the sales. Has
the consumer buying patterns changed or if they prefer a competitors vehicle over
Commodore. It is also important to identify the competitors and analyze the
manufacturing, designing, operations, supply chain, pricing, marketing and sales
approach vis-a-vis with that of the competitors. In this period post 2010, pot the free
trade agreement with Thailand, the number of vehicles sold that are coming from
Thailand has escalated to almost 230000 from a figure of 85000.
Also a common psychology that impacted the consumer buying behavior in this
particular case was that the car buyers believed they will not be able to buy or sell
any Holden-badged car in the future and hence shifted to buying others, whereas
the company is going to stop producing only after 2017 and will be relying on
import only businesses for its operations in Australia. Thus there has been a lack of
clarity of the messages from the organization to the customers.
It needs to rethink on its economies of scale, organizations structure and
management policies, spending capacities etc.

Q3: Critically analyze how innovative thinking and

intrapreneurial orientation could have saved the Holden
Manufacturing Group
Adopting innovative thinking, brining in disruptive ideas and solutions and a strong
intrapreneurial orientation could have indeed gone a long way to save the Holden
Manufacturing Group.
Rather than pushing sales of the vehicles that had lost its sheen, the company
should have understood the shifting dynamics of the market and designed and
started manufacturing new units. It was important for Holden to shift from the
premium Commodore and Cruze ranges to low cost large scale utility vehicles or
passenger vehicles manufacturing. This would have given the imported vehicles
from Thailand and South Korea a head on competition. Also technological
enhancements such as introducing all-wheel-drive-spin-offs rather than just rearwheel drives and many more technological upgradations could have improved the
performance of Holden cars. Also it could have allowed for greater participation
from its customers in suggesting the design, performance and other changes in the
vehicle to earn their loyalty.

Also Holden could have considered manufacturing the vehicles in a different country
where the cost of manufacturing will be cheap and thus focus on import based
businesses. Similarly it could have considered on expanding and improving several
in-house capabilities to reduce dependencies on the large number of suppliers thus
tightening the supply chain.
Reducing Engineering operations, parting from vehicles that no longer are in vogue
and need to revive the ones that still are in demand and coming up with some
global concept cars are further some of the innovative changes that could have
brought in.

Conclusion
Political, Economical, Social and sometimes even technological and competitive
factors can bring an organizations operations to a standstill. However, with a
farsightedness and preparedness to fight the odds and the changes can well equip
any organization to deal with the changing market dynamics and remain profitable.
Holden needs to identify what factors are crucial for it to remain competitive and
sustainable in the market despite the shutdown of its local cars manufacturing
capacities and if it can resume the production without sufficient dependence on the
Governments funding.

References
1. IBISWorld 2012a Nuguid, A., IBISWorld Industry Report C2811 Motor Vehicle
Manufacturing in Australia, July 2012, www.ibisworld.com.au
2. IBISWorld 2012b Nuguid, A., IBISWorld Industry Report X0014 Automotive
Industry in Australia, September 2012, www.ibisworld.com.au
3. Holden 2012, Next Generation Holden Manufacturing Secured, Media Release
22 March 2012, accessed at
http://media.gm.com/media/au/en/holden/news.detail.html/content/Pages/ne
ws/au/e n/2012/Mar/0322_NextGenerationHoldenManufacturingSecured.html
on 26 February 2013
4. Hutchens G. 2013, Car manufacturing significant to economy, Sydney
Morning Herald, 11 April 2013, accessed at
http://www.smh.com.au/business/carmanufacturing-significant-to-economy20130410-2hlol.html#ixzz2QgFKK0EN on 10 May 2013

5. Wright JN n.d., Thailand Automotive Production Closes in on Top 10 Global

Ranking, accessed at http://www.thaiautoparts.or.th/download/Article
%205.pdf on 1 March 2013
6. Alvesson, M. and Willmott, H. (1992) On the Idea of Emancipation in
Management and Organizational Studies, Academy of Management Review
17(3): 432-64.
7. Alvesson, M. and Willmott, H. (1996) Making Sense of Management: A Critical
Introduction. London: Sage.