Managerial Economics PowerPoint No Plagarism and APA format

Running head: MANAGERIAL ACCOUNTING

MANAGERIAL ACCOUNTING 4

Managerial Economics

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Managerial Economics

It important to start by getting an overview of the auto parts manufacturing industry in the United States of America. Over the past 5 years, the auto parts manufacturing industry has generally witnessed a remarkable growth due to the rising sales. Increased disposable income and higher consumer confidence have contributed to an increase in the volume of car sales. One very vital point that is worth mentioning here is that stronger new car demand has generally triggered increased production among the vehicle manufacturers and this is the reason behind the revenue growth that has been witnessed in the industry over the last five years. Specifically, in the United States, the auto parts industry has grown by about 2.4% and its revenue was $73 in the year 2018 (IBISWorld, 2018.).

According to IBISWorld (2018), companies in the auto parts industry operate in a market that is globalized as well as competitive. When the US dollar is weak compared to other currencies around the globe, auto parts that are domestically produced become affordable compared to the auto parts that are made in foreign countries. One of the opportunities for American-based companies is that the trade-weighted index might decrease from 2018 and this could be a very good opportunity for these companies (IBISWorld, 2018). According to Anand (2017), US auto parts markets are expected to peak to historically high levels. Auto sales are in fact expected to surpass a total of 1.5 million auto sales by the year 2021. One important point that is worth mentioning with regards to this is that demand for the auto parts is dependent on the relative number of those new vehicles that are being produced. The number of vehicles being produced is also dependent on the demand of new vehicles by consumers, which is driven by a number of macro-economic factors that include fuel prices, interest rates, credit availability, level of employment in the country, and consumer confidence.

Based on this information, it is clear that demand elasticity of auto parts is relatively elastic. This is because the demand for the auto parts does not dependent only on the price of the product. It is dependent on a number of other macro-economic factors that include the level of employment, consumer confidence on the company’s auto parts, interest rates, credit availability, and fuel prices; all of which determine the demand for new cars among the American customers (Anand, 2017). Considering the fact that there has been an increase in the revenue in the industry over the last five year it would be advisable for the company to relocate its operation to the United States.

References

Anand, K. (2017). Auto Parts & Equipment Manufacturing Industry. Retrieved from: https://www.biz.uiowa.edu/henry/download/research/Auto_Parts_2.pdf

IBISWorld. (2018). Auto Parts Manufacturing Industry in the US. Retrieved from: https://www.ibisworld.com/industry-trends/market-research- reports/manufacturing/transportation-equipment/auto-parts-manufacturing.html