Car Eu Essays

Car Eu Essays Car Eu Paper Car Eu Paper The single European act became law among member states of E Goal: To remove barriers to cross border trade Investment within confines of E Benefits: Increased competition corresponding reduction In prices Jan 1, 1999: SUE member states adopted Euro as common currency Benefits: Would make it easy for the European consumers to compare prices across nations leading to harmonistic of prices within Euro Zone Reason for Persistence of price differentials within EX. Since 1985: Block Exemption Clause: Regulations that allowed car manufacturers to restrict competition between car dealers. (Automakers dictated where a dealership could be located, to limit the number of brands that a dealer could sell prohibit dealer from selling vehicles outside home country) Block exemption clause was scrapped in 2002: European Commission Issued new set of regulations that encouraged competition within EX. market (came Into full effect In 2005) What are the sources of significant price differentials in the EX. automobile market? Resource of price differentials: block exemption clause. Due to this, the car dealers were restricted to carry a free and competitive business among them. This control on the dealers segmented the market through controlled competition which resulted In such a difference In prices of same cars within the European market. Transportation cost 2. Reasons behind the UK market being one of the most expensive car markets: Block exemption clause in EX. competition policy: Tight control and lack of competition among the dealers which will make their operation inefficient and costly. High costs of doing business in I-J. The purchasing power of the customers in UK might be higher than most other European countries. 4. What do you think will happen to the price differentials in the EX. automobile market under the new regulations set to take effect in September 2005? After the implementation of new regulations: Restriction by the companies on the lealer will be removed, thus enabling free competition and efficiency. The degree of price differentials will decrease in the European market. 5. What will be the impact of these new regulations on a) competitive intensity in the EX. automobile market b) Profitability of automobile operations in the ELI? 0 a. The new regulations shall increase the competition in the automobile market by remov ing control of the companies over the dealers. Due to the increased competition, their will be more value to the customers. The profitability of the automobile operations would depend on the ability to reduce production cost, innovate and reach scale of economies. If these parameters are achieved profitability would increase. B. 6. Which automobile companies will do best in the post-2005 environment ? 0 Post 2005, due to impact of new regulations, there shall be increase in the competition in the automobile market. Companies that would innovate, provide automobiles to the customers at competitive price, superior operation efficiency I. E achieve scale economies at the earliest would do best.