THE INTERNATIONAL PRODUCT LIFE CYCLE AND UNITED STATES REGULATION OF THE AUTOMOBILE INDUSTRY

The product life cycle model is used to explain the U.S. trade position in automobiles. According to this conceptual model, certain industries follow a predictable pattern that begins with the U.S. as a net exporter and ends with the U.S. as a net importer. Available corporate strategies to prolong or alter the cycle are mentioned: location of more production facilities overseas; innovation designed to start a new cycle or to isolate the market from the rest of the world; and shifting resources to other activities. Selling an increasingly larger car is discussed as the strategy adopted by U.S. automakers in an effort to differentiate the American product from the product sold in the rest of the world. By 1970, the industry realized that it could not continue to rely on this differentiation strategy. As suggested by the product life cycle model, the trend toward an international "standard car" is examined. Increasing competition faced by the U.S. auto industry because of more open borders and more producers in other markets is addressed. Particular mention is made of the increasing role of state-owned automobile producers like those in Western Europe. Innovation is presented as a possible but unlikely strategy for American producers to avoid tough price competition from foreign imports. The present automobile industry is described as a mature oligopoly, with high fixed costs and vulnerability to foreign competition, but different from other mature industries in ability to differentiate the product, in consumer loyalty, and in national parts and service networks. It is recommended that the U.S. government not adopt a protective policy toward the auto industry. Rather than creating import barriers, or encouraging foreign quotas or state-supported market-sharing arrangements, the government should ensure that the industry does not build links with foreign competitors that will restrain price competition, thus reducing rivalry and innovation.

• Supplemental Notes:
  • Also published in HS-028 918, "Government, Technology, and the Future of the Automobile," New York, 1980 p 270-92. Presented at Harvard Business School Symposium on Government, Technology, and the Automotive Future, Boston, 19-20 October 1978.
• Corporate Authors:

  McGraw-Hill, Incorporated

  330 West 42nd Street
  New York, NY  United States  10036
• Authors:
  • Wells Jr, L T
• Publication Date: 1980

Media Info

• Features: References;
• Pagination: 23 p.

Subject/Index Terms

• TRT Terms: Automobile industry; Competition; Innovation; Markets; Regulations
• Subject Areas: Law; Safety and Human Factors; Vehicles and Equipment;

Filing Info

• Accession Number: 00393045
• Record Type: Publication
• Source Agency: National Highway Traffic Safety Administration
• Report/Paper Numbers: HS-028 935
• Files: HSL, USDOT
• Created Date: Feb 28 1985 12:00AM