econ 210 assignment

Answer

1. • econ 210 assignment

     1. The links to the 2 articles are;

     https://africa.businessinsider.com/finance/general-motors-surges-9-after-it-commits-dollar2-billion-to-build-electric-vehicles/slpdvy8

     https://www.npr.org/2020/10/21/926242015/gm-reintroduces-hummer-as-fully-electric-truck-1st-model-will-sell-for-112-595

     2. The good this market supplies to consumers

     The good this market supplies to consumers is electric trucks which include the new electric Hummer truck and the new Cadillac Lyric all vehicles made by General Motor Company (GMC) (Business Insider, 2020).

     3. A summary of any changes mentioned in supply and demand

                 On the supply side, General Motors disclosed that it will increase its capacity of making electric vehicles by investing $2 billion in its manufacturing plant which is located in Spring Hill in Tennessee in the US.  To further boost its existing capacity to make more electric vehicles the corporation also disclosed that it intends to invest a further $152.5 million within the next five years in plants in Michigan (Business Insider, 2020).  These strategies will increase the supply of the electric vehicles.  These investments are aimed at improving the production of SUVs and also the other models. On the demand side the articles noted that these investments were made due to increase in demand arising from a favorable shift in customers’ and investors’ tastes and preferences for electric vehicles than vehicles powered by gasoline (Business Insider, 2020).

                 The articles noted that the runaway success of Tesla’s electric cars which grew the value of the company to over $400 billion even when fewer cars were sold as compared to general motors is an indicator of a huge demand for electric cars.  Demand is expected to be high since the vehicles such as the new electric Hummer truck will be fuel efficient unlike the old hammer which was rejected by many customers because of being fuel inefficient. The articles further noted that electric vehicles were a popular brand and hence demand was high (NPR,2020).  Most customers had rejected the gasoline powered Hummer trucks because they were not gas-efficient. The company have indicated that the new electric trucks will have gas mileage comparable to a SUV. This is expected to increase demand for the trucks (NPR,2020).

     4. Summary of changes in price and predictions about future prices

                 General Motors plans to sell its first electric Hummer truck at $112,595. Even though the price seems high, the corporation disclosed that it had obtained sufficient reservation requests. The corporation intends to lower prices later   for the second electric Hummer truck from $99,995 to $79,995 for the third truck produced and sold (NPR,2020).

     5. One aspect of the market that is regulated by the Government

                 One aspect of the market that is regulated by the government is vehicle safety standards. Every vehicle manufacturer is required to protect the public from unreasonable risk of accidents by abiding by the National Traffic and Motor Vehicle Safety Act.  The purpose of this regulation is to minimize the number of road accidents that occur due to vehicle design flaws, construction defects or operation of a truck or other vehicle.  The regulation is supposed to protect motorists from vehicles that are not safe to drive(NPR,2020).

                 However, the regulation has various unintended consequences. Firstly, the regulation leads to increased costs of compliance and manufacturing which increases the cost of making vehicles. This makes the cost of vehicles uncompetitive in the market. Secondly, compliance testing is too involving and hence wastes valuable time (NPR,2020).

      

     6. 6. Two assumptions from the supply and demand model and how they are violated in the market scenario from your article

                 One of the assumptions is that players in the industry have perfect information. This implies information about each car manufacturer is accessible to customers and players in the industry.  This assumption is violated in the market because information is not readily available. It’s not possible to get information from every player in the industry.     Purchase decisions are usually influenced by marketing efforts that the company makes (Ha-Joon Chang, 2013).

     The next assumption is that there is free entry and exit in the industry. This is very far from the reality in the market. This is because there is no free entry or exit. Vehicle manufacturing requires a huge investment. It is therefore not easy for new players to enter the market or exit it.  Car manufacturers are just few and they compete among themselves (Ha-Joon Chang, 2013).

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Answer

Assessing Risk and Reward

The Nissan Motor Company is one of the leading automobile makers in the world. The Japanese carmaker has primarily enjoyed a successful run, allowing it to enter various regional and international markets such as the United States. However, the changing business environment was not favorable to the company in 2019. Notably, the cooperation recorded losses amounting to 7.8%. The experience pushed the management into making tough decisions, requiring almost all of its North American workforce to go for unpaid leaves.

In late 2019, the company announced that the decline in sales necessitated a two-day unpaid leave for the North American workers. The stated days for the vacation were January 2 and 3^rd    (Chicago Tribune, 2019).  Notably, this move was a crucial decision for the company because of its conflicting impacts. Whereas on the positive side, it could help the firm minimize expenses, it threatened to affect the public perception of the company regarding employee welfare.

The rewards for the decision involved cutting expenses by not paying the workers on leave, which eventually would translate into reduced expenses. Another reward was that the decision could allow the company to optimize performance by evaluating employee performances then developing new milestones. However, on the low side, the company risked affecting its public image and brand name, especially in the North American market. As per Chakravorti (2010), the way an organization treats its employees influences the firm's public perception. Thus, Nissan risked eliciting a negative public perception. With a distorted public image, the company could fail to revive its declining sales.

I would have advised the management of Nissan to utilize the Predictive Analytic perspective in determining the right decision to take. Ideally, the approach tries to predict what might happen in the future if particular decisions or actions are undertaken at the moment (Traymbak & Aggarwal, 2019). Looking at the situation at Nissan, the company needed to develop a goal such as increasing sales. After that, they would have made decisions aimed at realizing the set goal. In this regard, the predicted outcome could give the management an overview of whether more risks existed or significant rewards could be realized.

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