The_Economic_Growth_of_Automobiles..

Appropriate Course For Chosen Organization/1 Economic Future For Industry The auto sales industry is a business that has two types of growth during certain economic periods. The auto industry is pro-cyclical which means it can be positively measured by the overall state of the economy. In this case it grows during economic good times and it slows down during economic bad times. With this in mind Big Drive auto must anticipate what cycle the business is in and make their business decisions accordingly in order to increase the overall bottom line of Big Drive Auto. Big Drive Auto not only sell vehicles but also services them as well as selling parts for repair. Big Drive Auto also does lucrative business, in motor oil, coolant, and replacement tires. Management must always pay attention to macroeconomic environmental signals that will help the company better plan business strategy. The GDP is an economic indicator that Big Drive Auto must pay close attention to. For example the historic data of the company for the last ten years shows that between the period of 1998 and 1999 the GDP in the auto industry grew from $434.7 to 494.4 Bn. There was also a big increase in vehicle unit sales compared to a small increase in auto service revenue and a decrease in oil, coolant and tire sales. When the economy is expanding it is recommended that Big Drive Auto borrow money to buy the big ticket items, such as those vehicles associated with going green (hybrid cars) Recently in an article in the Boston Globe, Derrick Jackson, columnist was quoted in saying that President Obama himself should say to the industry  "Fellas, give us one car, one car that will make Honda and Toyota turn their heads. Give us one car that is green for the environment and puts green in American wallets. Give us one green car that 20-somethings will text-message each other about. Give us one car that will convince Americans - not just the eco-elite in the cities but the uncles and aunts in the Heartland - to get out of SUVs. Give us one car that announces to the rest of the world that America is not just resigned to change, but truly happy to join the green revolution.". This advice should be well taken by Big Drive Auto as the economy expands. When the economy slows down due to factors such as rising interest rates and constricting monetary policies Big Drive Auto must shift the emphasis to the part side of the business as seen from data submitted for the period 2000/2001 when the GDP dropped from 466.8 to 420.2 where drops in vehicle sales went from 145,000 to 133,000 units while service revenue increased. If Big Drive Auto can watch for the upward sloping curve which favors borrowing more in the short term during which interest rates are lower they should be able to do well in spite of the economic situation. There will always be vehicle maintenance so there is not much that can be done however, it is recommended that management understands the inelastic component of vehicle maintenance. Jackson, Derrick Z., May 19, 2009 “The Boston Globe” http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/05/19/us_auto_industry_needs_to_go_green/