THE EFFECT OF FUEL ECONOMY STANDARDS ON CORPORATE STRATEGY IN THE AUTOMOBILE INDUSTRY

The response of automobile manufacturers to increasingly stringent fuel economy regulations is presented as a case study of the effects of regulation on corporate strategy. Fuel economy standards have changed the environment in which major automobile companies operate by making fuel economy a major competitive characteristic, by adding to and altering the risks associated with existing product-market strategies, and by making public policy process a part of a firm's strategic environment. Performance standards enhance firm-to-firm competition, by making the firms compete against the standard itself and among themselves in efficiency and effectiveness in meeting the standard. To comply with Corporate Average Fuel Economy Standards, automakers must cope with technological, market, financial, and regulatory risk. Among the important changes in the automobile industry's strategic environment brought on by fuel economy policies are those in market segmentation, product mix, pricing, geographical markets, and strategic flexibility. The impact of fuel economy regulations on political strategy includes an end to "stonewalling," an increased commitment to the public interest, the development of differentiated strategies unique to each firm, an increasing attention to building political coalitions with nonindustry groups, an attempt to tie positions taken to broader national concerns (e.g. consumer protection, unemployment), and the use of a more open and candid style to reduce some aspects of regulatory risk. Fuel economy regulations have produced internal organizational changes such as creation of new planning groups, strengthening of government relations organizations, weakening of decentralized divisional staffs, strengthening of research and marketing staffs, and changes in executive personnel. The decision-making process is outlined in the formation of corporate political strategy in response to regulation: impact and momentum of a proposed public policy, firm resources applicable to the issue, values and ideology of executives, social responsibility and propriety of the proposed position, tactical considerations, and implementation.

  • Supplemental Notes:
    • Also published in HS-028 918, "Government, Technology, and the Future of the Automobile," New York, 1980 p 144-61. Presented at Harvard Business School Symposium on Government, Technology, and the Automotive Future, Boston, 19-20 October 1978. Research sponsored in part by Harvard Business School.
  • Corporate Authors:

    McGraw-Hill, Incorporated

    330 West 42nd Street
    New York, NY  United States  10036
  • Authors:
    • Hanson, K O
  • Publication Date: 1980

Media Info

  • Features: References;
  • Pagination: 18 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00392311
  • Record Type: Publication
  • Source Agency: National Highway Traffic Safety Administration
  • Report/Paper Numbers: HS-028 927
  • Files: HSL, USDOT
  • Created Date: Feb 28 1985 12:00AM