Testing

1.1 The car industry market structure and the characteristics of the market. In the car industry it changes in terms of the trends and in the market condition. It is obvious that the market structure in the car industry is an oligopoly market because some large supplier is often the controlling ones. In the oligopoly market, the firms concentrated for the spending of advertising and marketing due to the high competition results in the market and firms manufacture branded products. Therefore, the car industry is an excellent illustration of an oligopoly market. Mehta (2010) states that 'what is an oligopoly market’. There are three important characteristics of an oligopoly market. Firstly, in the car industry it is a common that it will be led by few huge firms. Secondly, an oligopoly market is divided into two categories which are the homogenous and differentiated products. The homogenous or differentiated products are specific industries in an oligopoly market. While differentiated products is those like in monopolistic market. Lastly, the entry barriers that actually help existing firms to learn more about firms to market control. Mehta (2010) states that ‘What are the Characteristics of Oligopoly’. 1.2 Level of competition in the car industry , oligopoly markets structure and the reasons for the competition that has changed. There are three models of oligopoly used to explain the price-output behavior. The kinked-demand model assumes a non-collusive oligopoly. Each individual firm assured that the rivals will compete with any price cuts from other firms. Therefore, the views of each firm for their demand are inelastic when the price decreased and the total revenue falls while the demand is elastic when the price is decreased. In addition, when the price is increasing, there are reasons to believe that the competitor will follow accordingly because they may raise their market shares by not raising prices. Price-output behavior, (Anon.,n.d). Game theory proposed that collusion is beneficial to the participating firms. Collusion increases profits, reduces uncertainty, and may constrain the entry of new competitors. A cartel may reduce the possibility of a price war breaking out particularly during a overall business recession. The kinked-demand curve’s movement toward inflexible prices may adversely affect profits if overall inflationary pressures increase costs. Maximizing profits have to be agreed and with a certain of prices. Oligopoly Behavior: A Game Theory Overview, (Anon.,n.d). Prices are changed only when cost and demand circumstances have been adjusted significantly and industry-wide. Approaching price adjustments are often communicated through publications, speeches, and so on. Publicizing the “need to raise prices” educe a consensus among competitors. The current price may be below the short-run profit-maximizing level to discourage new competitor. The results sometimes may occasionally break down from the price leadership in oligopoly market structure. Price-output behavior, (Anon.,n.d). 1.3 The sales trend for car market and the suitable data or statistics supporting the arguments. In the year of 2007, the market inquiry stated that the sales of Malaysian vehicle had reached 4,648 units with a general growth of 13.8% and it is expected to be increase in the approaching years. During the interval of slacking off, Malaysia’s government overwhelms other competing economies by dominating inflation and eventually kept costs down. However, in the year of 2000 Malaysia car industry exported US$274.2 million worth of automotive parts. Survey report regarding auto industry Malaysia (Anon., n.d) The above table is about the sales of motor vehicle in Malaysia (units), 1995 to 2003. By comparison, Proton and Perodua car sales it is very clear that Proton sales were better than Perodua car sales. In the year of 1998, Proton sold 87,489 units and that is the lowest sales of the year. However, the highest sales for Proton car which falls in the year of 2002 and same goes to Perodua car sales. (Mahidin and Kanageswary, 2004) states that ‘Production of motor vehicle in Malaysia (units), 1995-2003’. 1.4 Challenges to the car industry and specific examples and evidences. The challenges in the car industry can be illustrate by the challenges faced by the Malaysian automobile industry. For example, ASEAN’s competitive edge realized through elimination of intra-regional tariffs and non-tariffs barriers. By doing that, it allows manufacturing sectors to become extra efficient and competitive. Nevertheless, Malaysia requested an addition of two years in opening its auto industry market , the reasons from Malaysia is that they need plenty time to compete globally since the national auto industry has not fully retrieved from the economic crisis in the year of 1998 and also the national auto industry is still at an initial stage. (Mahidin and Kanageswary, 2004) states that ‘the challenges of the Malaysian automobile industry. The crucial challenge for the Malaysia’s automobile industry is from the Thailand’s automobile industry in the areas of production, technology, sales and product standard. Barclay Consultant has a report on ASEAN automobile industry stated that ASEAN automotive sector concerned about AFTA that would conceive more competitive environment through the diminution and exclusion of intra-regional tariffs and non-tariff barriers. The less competitive firms will face the crisis, because they are no longer function under government policies protection. (Mahidin and Kanageswary, 2004) states that ‘the challenges of the Malaysian automobile industry.