Global issue of Accounting Minor Report
???The Effects of Globalization on the Automotive Industry???

Table of Contents
Executives summary 3
1. Introduction 4
1.1 Globalisation 4
1.2 Automotive Industry 4
2. Globalisation on the Automotive Industry 6
2.1 Globalisation of markets 6
2.2 Globalisation of production 6
2.3 Declining trade and investment barriers 7
2.4 The role of technological Change 8
3. Conclusion 10
Reference list: 11

Executives summary
This paper will talk about the effects of globalization on the automotive industry. The world economy is moving toward a world in which barriers to cross-border trade and investment are declining. The globalisation of market refers to the merging of historically distinct and separate national markets into one huge global marketplace. Companies hope to lower their overall cost structure and improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. The lowering of barriers to international trade enables firms to view the world, rather than a single country, as their market. In economic terms, the most important are probably the development of commercial jet aircraft and super-freighters and the introduction of containerisation, which simplifies transhipment form one mode of transport to another.

1. Introduction
1.1 Globalisation
A fundamental shift is occurring in the world economy which is moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border trade and investment; by distance, time zones, and language; and by national differences in government regulation, culture, and business system. (Kew & Stredwick, 2005, p34-5)
And the world economy is moving toward a world in which barriers to cross-border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent integrated global economic system. The process by which this is occurring is commonly referred to as globalisation. (Meyer, Mar, Richter & Williamson 2005, p.256)
1.2 Automotive Industry
The automotive industry designs, develops, manufactures, markets, and sells the worlds motor vehicles. In 2008, more than 70 million motor vehicles, including cars and commercial vehicles were produced worldwide. In 2007, a total of 71.9 million new automobiles were sold worldwide: 22.9 million in Europe, 21.4 million in Asia-Pacific, 19.4 million in USA and Canada, 4.4 million in Latin America, 2.4 million in the Middle East and 1.4 million in Africa. The markets in North America and Japan were stagnant, while those in South America and other parts of Asia grew strongly. Of the major markets, Russia, Brazil, India and China saw the most rapid growth.
About 250 million vehicles are in use in the United States. Around the world, there were about 806 million cars and light trucks on the road in 2007; they burn over 260 billion gallons of gasoline and diesel fuel yearly. The numbers are increasing rapidly, especially in China and India. In the opinion of some, urban transport systems based around the car have proved unsustainable, consuming excessive energy, affecting the health of populations, and delivering a declining level of service despite increasing investments. Many of these negative impacts fall disproportionately on those social groups who are also least likely to own and drive cars. (Toyota Motor, 2009) Toyota will be the real example in this paper. In 1934, while still a department of Toyota Industries, it created its first product Type A engine and in 1936 its first passenger car the Toyota AA. The company was eventually founded by Kiichiro Toyoda in 1937 as a spinoff from his fathers company Toyota Industries to create automobiles. (Toyota Motor, 2009)

2. Globalisation on the Automotive Industry
2.1 Globalisation of markets
The globalisation of market refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. (Fisher, Hughes, Griffin & Pustay 2006, p.152)
With a major presence with Europe, due to the success of Toyota Team Europe, the corporation decided to set up TMME, Toyota Motor Europe Marketing & Engineering, to help market vehicles in the continent. Two years later, Toyota set up a base in the United Kingdom, TMUK, as the companys cars had become very popular among British drivers. Bases in Indiana, Virginia and Tianjin were also set up. In 1999, the company decided to list itself on the New York and London Stock Exchange. (Toyota Motor, 2009)
2.2 Globalisation of production
The globalisation of production refers to the sourcing of goods and services and quality of factors of production. By doing this, companies hope to lower their overall cost structure and improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. While historically significant outsourcing has been primarily confined to manufacturing, increasingly companies are taking advantage of modern communications technology, and particularly the internet, to outsource service activities to low-cost producers in other nations. (Fisher, Hughes, Griffin & Pustay 2006, p.154)
Toyota has factories in most parts of the world, manufacturing or assembling vehicles for local markets. Toyota has manufacturing or assembly plants in Japan, Australia, India, Canada, Indonesia, Poland, South Africa, Turkey, Colombia, the United Kingdom, the United States, UAE, France, Brazil, Portugal, and more recently, Argentina, Czech Republic, Mexico, Malaysia, Thailand, Egypt, China, Vietnam, Venezuela, the Philippines, and Russia. Toyota has invested heavily in vehicles with lower emissions, for example the Prius, based on technology such as the Hybrid Synergy Drive. (Toyota Motor, 2009) In 2002, Toyota had successfully road-tested a new version of the RAV4 which was powered by a Hydrogen fuel cell. Scientific American called the company its Business Brainwave of the Year in 2003 for commercializing an affordable hybrid car. (Toyota Motor, 2009)

2.3 Declining trade and investment barriers
In late 2001, the WTO launched a new round of talks aimed at further liberalising the global trade and investment framework. The agenda includes cutting tariffs on industrial goods, services, and agricultural products; phasing out subsidies to agricultural producers; reducing barriers to cross-border investment; and limiting the use of antidumping laws. Such trends facilitate both the globalisation of markets and the globalisation of production. The lowering of barriers to international trade enables firms to view the world, rather than a single country, as their market. Thus, a firm might design a product I one country, produce component parts in two other countries, assemble the product in yet another country, and then export the finished product around the world. (Kew & Stredwick 2005, p.52)
In 2002, Toyota initiated the “Innovative International Multi-purpose vehicle” project (IMV) to optimize global manufacturing and supply systems for pickup trucks and multipurpose vehicles, and to satisfy market demand in more than 140 countries worldwide. IMV called for diesel engines to be made in Thailand, gasoline engines in Indonesia and manual transmissions in the Philippines, for supply to the countries charged with vehicle production. For vehicle assembly, Toyota would use plants in Thailand, Indonesia, Argentina, South Africa and Pakistan. These four main IMV production and export bases supply Asia, Europe, Africa, Oceania, Latin America and the Middle East with three IMV vehicles: The Toyota Hilux (Vigo), the Fortuner, and the Toyota Innova. (Toyota Motor, 2009)

2.4 The role of technological Change
The lowering of trade barriers made globalisation of markets and production a theoretical possibility. Technological change has made it a tangible reality. Since the end of World War II, the world has seen major advances in communication, information processing, and transportation technology, including the explosive emergence of the internet and World Wide Web. (Griffin & Pustay 1999, p.69)
In economic terms, the most important are probably the development of commercial jet aircraft and super-freighters and the introduction of containerisation, which simplifies transhipment form one mode of transport to another. (Kew & Stredwick 2005, p.60)The advent of commercial jet travel, by reducing the time needed to get from one location to another, has effectively shrunk the globe. As transportations costs associated with the globalisation of production declined, dispersal of production to geographically separate locations became more economical. The real costs of information processing and communication have fallen dramatically in the past two decades. (Kew & Stredwick 2005, p.60-1)
In addition to the globalisation of production, technological innovations have also facilitated the globalisation of markets. Low-cost global communications networks such as the World Wide Web are helping to create electronic global market places. Low-cost transportation has made it more economical to ship products around the world, thereby helping to create global markets. (Kew & Stredwick 2005, p.62)
Toyota has introduced new technologies including one of the first mass-produced hybrid gas-electric vehicles, of which it says it has sold 1 million globally, Advanced Parking Guidance System (automatic parking), a four-speed electronically controlled automatic with buttons for power and economy shifting, and an eight-speed automatic transmission. Toyota, and Toyota-produced Lexus and Scion automobiles, consistently rank near the top in certain quality and reliability surveys, primarily J.D. Power and Consumer Reports. (Toyota Motor, 2009)
In 2005, Toyota(2009), combined with its half-owned subsidiary Daihatsu Motor Company, produced 8.54 million vehicles, about 500,000 fewer than the number produced by GM that year. Toyota has a large market share in the United States, but a small market share in Europe. It also sells vehicles in Africa and is a market leader in Australia. Due to its Daihatsu subsidiary it has significant market shares in several fast-growing Southeast Asian countries.

3. Conclusion
The world economy is becoming more global, the globalisation of markets implies that national markets are merging into one huge marketplace. The globalisation of production implies that firms are basing individual production activities at the optimal world locations for the particular activities. There are two factors seem to underlie the trend toward globalisation: declining trade barriers and changes in technologies.

Reference list:
Fisher G., Hughes R., Griffin R., & Pustay M. 2006, ???International Business: managing in the Asia-Pacific???, 3rd edi, Pearson, Frenchs Forest, NSW
Griffin R.W. & Pustay M.W. 1999, ???International Business: a Managerial Perspective???, 2nd edi,
Addison-Wesley, New York
Kew J. & Stredwick J. 2005, ???Business Environment???, 2nd edi, CIPD, London
Meyer A. D., Mar P.C.M, Richter F. & Williamson P. 2005, ???Global Future???, John Wiley& Son Pte Ltd, Singapore
Toyota Motor, 2009, ???Toyota: Moving forward???, viewed 25th Aug 2009, < http://www.toyota.com/>