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Key Topics
Requirement
Microeconomics - Elasticity
Solution
Elastic analysis of automobile company - Hyundai
The manufacturing and selling of the cars that are classified as a "necessities " has elastic demand. It is to be noted that the nowadays there are multiple substitutes for basic car segment and hence the slight increase in the price of the car, can affect the demand for the car. Also, the car having regular features with lower price will definitely have more demand.
I assume myself as the manager of Hyundai the automobile company, which produce almost necessity cars. It is clear that the sale of cars is higher in the country where the real income of the citizen is higher as compared to the countries with lower per capita. In the developed country people prefers luxury car as they have the higher income, so we can say that for the company, producing necessity segment car should focus in developing country, where people are very price sensitive, and market size is larger.
To increase the sale of the Hyundai car, company should focus on following three points
Lower Price – Due to heavy competition in the automobile industry in every country, the customers have many substitutes with the same type of features. And hence to sustain in the market, the company should follow the price offered by competitor or lower price
Opening Market in New Geographical Area – The people who average income can afford only one car, and hence the country having the well structured market of the car can be saturated very early. The Hyundai should select the country where the market size is huge, and the car industry is not so much established. In such market the demand of the car is elastic.
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Differentiation
Every company has its core competence to sustain in the market. Where there are some cars within the same range, the customer looks at the features of Company like a look, style, mileage and comfort. As far as Hyundai is the concern it is known for its comfort and speed. The company should maintain the same.
To sum up I can say that to increase the revenue of the company, the sale of the car should be more. To increase the sale, the market size of the company should be more. The company should introduce new models of cars on the regular interval with the lower price, maintaining the core features of comfort and speed. The company should focus on developing country like India, South Africa and many more.
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Mike Steven,2009, Rubber Bands and the Automobile Industry,[Online ], Available at: http://www.themotorreport.com.au/22527/rubber-bands-and-the-automobile-industry, [ Accessed on 14 December 2015]
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Anon ,n.d., List of developing country , [online ], Available at : http://www.iugg2015prague.com/list-of-developing-countries.htm , [ Accessed on 14 December 2015]
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