Following up on cars and caring

Further to two posts from last week (on the Australian auto industry subsidy package and on the collapse of childcare giant ABC Learning), two relevant articles have popped up in the business press.

This piece in The Economist provides valuable insights into the growth of car manufacturing in emerging markets, in particular the BRICs (Brazil, Russia, India & China). It does highlight the huge pull towards these markets for the major global car manufacturers, and also the limited scope to truly globally integrate their operations. The attraction of untapped consumer markets have pulled the firms into each market. Trade barriers and the need for product adaptation have played a major role in these MNEs manufacturing in each of these countries also. The output levels (and more importantly the growth rates) talked about here far swamp those in Australia (around 2.5m cars per year in Brazil, 6m in China, 1.5m, 2m in Russia compared with 1m in sales in Australia, but only about 300,000 vehicles produced).

And on the ABC Learning front, every journalist worth their salt is now calling on their immense powers of hindsight to demonstrate why the firm was bound to fail. This article makes a couple of interesting points regarding the failure of the childcare firm to achieve any economies of scale from consolidation, and the illusory nature of growth generated via acquisitions.

I’m not so convinced that firm wasn’t able to lower some of it labour costs or “achieve economies of scale in purchasing power or marketing power”. I also struggle to take any journo seriously who tries to use this downright fallacious argument to support his case: “Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.” Not sure what his definition of overtaken is, but corporate farming (and childcare) has certainly been growing at a faster rate that family-run operations in Australia for quite a while now.

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Tags: ABC learning, Australia, automobile industry, BRICS, business failure, car makers, childcare, daycare, economies of scale, International business, Internationalisation, multinationals, Strategic management