UK Motorcycle Industry Analysis (Including PESTEL)

UK MOTORCYCLE INDUSTRY

Part A: Competitive Context

The UK motorcycle industry is among the most prominent and profitable sectors of the UK economy. According to the statistics of 2018 by IBIS World, the total revenue of the UK motorcycle industry is £615 million per year. Its annual average growth rate is 7.6% and employees nearly 1085 individuals (IBIS World, 2019). The recent economic downturn of UK economy has also affected the Two wheeled world as well, as according to MCIA UK, nearly 11.6% reduction in production of MOPEDS was reported as compared to 2017-2018. Moreover, the total motorcycle production was -18.5% for the year 2018 (MIA, 2018). Recently, the UK economy faces many aspects of demographic treaties, political events, turbulent business environments and dynamic changes in the relationships with other industry dependent businesses, which has shifted the way of doing businesses, including the Motorcycle Industry UK (Harvard Business School Working Knowledge, 2019). This brief paper will provide insights about the macro business environment of UK Motorcycle industry using a suitable framework such as PESTEL. The framework will enable to clearly demonstrate the key success factors and threats for the industry and indicate opportunities for the industry to continue its growth and business versatility in the UK economy.

 

PART B: Analysis of Marco Business Environment

The current UK political environment highlight to the fact how both businesses and governments perform in awakening of “Brexit”, a referendum held for the people of UK to vote for leave from the UN by 29th March 2019. The single market regulation (licensing etc.) will affect the MCIA (Motorcycle Industry Association UK). In its recent press release and reaction to Brexit, MCIA clearly indicates that trading environment for the two wheeled industry will remain unchanged however, EU terms of foreign business and trade relations will shift to uncertainty and complex period (MIA, 2017). For this, a demand for suitable free trade barrier with European partners and their trading partners is required. According to a research article by (Bluesky Interactive, 2017) states that many legal parties in the UK intend to see diesel free emission environment and want to see more electric/zero-emission cars and bikes. The current political scenario implies that, to legislate and overcome the turbulence political landscape, UK Government along with MCIA should produce specific transitional arrangements between EU and UK, that will ensure EU labor security and its continuation without additional costs. The MCIA should assess its carbon footprint and work accordingly to formulate its manufacturing of low emission bikes with new legislations.  Furthermore, both trade and technical frameworks should be adopted that mutually benefits for all, such via the so-called ‘Great Repeal Bill’, that suggests adopting all EU legislations as UK legislations (WARD, 2018).

Economically, the key factor that is affecting most businesses, is weakened pound as compared to Euro by 6% and unpredictable interest rates have significantly damaged the sector’s positive economic impact in recent times and its futuristic scope is narrowing down and MCIA is no exception. The 2015 evaluation portrayed that economic presence is more than £7.3billion to the UK economy, with 5,700 businesses directly employing over 58,000 people (ICF Consulting Services, 2015). UK Government in 2017 will take over central bank in regulating the economic growth by implementing fiscal policy which will use tax cutting and increased government spending. This however recently seems not an adequate scenario, as UK is about to form its own economic policies, which will push the Central Bank ECB, to continue its Quantitative Easing policies since the global recession of 2008 (Lunn, 2017). Recently the statistics of 2017 by DOT (Department of Transport UK) shows that UK powered two-wheeler market saw rise in motor cycle registrations in 2016-17, while the total distance travelled in both years was 2.8 billion miles (Department of Transport UK, 2018). This unchanged travelling distance despite rise in registered motorcycles, depicts that due to recent economic recession and uncertainty has led motorcyclists to reduce their travel impact as they are required to prepare different documents if they wish to travel after Brexit. MCIA pointed to the introduction of new emission limits as a contributor to the decline in registrations, along with the effect of Brexit on consumer confidence (Redman, 2015).

 

PART C: Business Opportunities

Mirroring the current state of economy and industry, the MCIA has business opportunities to invest more in green technology and using renewable energy technologies. Environmental Protection Agency UK has put sanctions on emission limit of vehicles and DOT is on a verge of reducing congestion and pollution from the country (Lovelace, Beck, Watson & Wild, 2011). This is the ideal opportunity for the MCIA as bikes can be emission free EVs and can significantly reduce congestion level across the country. The Industry heavily relies on part suppliers from different EU regions and with uncertain foreign exchange rates and interest rates, the MCIA has an opportunity to locate and recruit local suppliers and staff. MCIA has an opportunity to work with governmental bodies to achieve UK Co2 emission target along with implementing “cycle to work” and continued support for the “Wheels to Work” initiatives, which will allow cheaper prices and can also include the simple loan of an employer’s bicycle to an employee as a tax-exempt benefit (MIA, 2018).

 

APPENDIX 1

PESTEL analysis framework consist of Political, Economic, Social, Technological, Environmental and Legal atmosphere of the business.

Factor Implication Importance

HML

Timeframe

Years

Political Factor

 

1.       Brexit

2.       EU & UK Legislation

3.       Thrive for Greener Environment

4.       Tariff Barriers

5.       Government Stability

 

MCIA with UK Govt need to adopt measures in form of legislations and agreements which can allow MCIA to continue work with EU after Brexit. MCIA is among the major industries for UK economy. The crisis of MCIA means loss of significant revenue, jobs, and industry crises. Immediate, < 1 year.
Economic Factors

 

1.       Weakened Currency

2.       Unstable Interest Rates

3.       Low Emission Target

4.       Global Recession

5.       Trade Agreements

6.       Inflation, EU labor security & high market competition

This implies that economic recession and uncertainty due to Brexit is causing MCIA to face challenging issues which can hamper its productivity and its market share in the industry can decline. High rate of inflation, interest rates and EU labor insecurities can hamper future growth. Industry crisis in MCIA means further downturn for UK economy, it can face unemployment, exchange rates fluctuations and instability in business and trade with other EU regions. Immediate < 1 year
Social Factor

 

1.       Increase number of registrations

2.       High CPI for motorcyclist as aiming towards EVs

3.       PTW gaining popularity

4.       Familiar Local Product Knowledge

Residents and Non-Residents, both enjoy a firm increase in usage, purchase and adoption of Motorcycles in recent times. MCIA aims to provide solutions to greener environment and reduce the level of congestion in UK. Futuristic, Long-term, 2-5 years.
Technological Factors

 

1.       Increase investments in R&D for EVs (electric Vehicles)

2.       Quality improvements in emission limits, Greener environment.

3.       Manufacturing Processes

MCIA is aiming to provide fully equipped PTWEV (powered two-wheeler electric vehicles) to cater to the govt carbon foot print targets. Technological advancements are in pursue of more personalized and friendly product innovations Technological improvements will help reduce congestion, production of high-quality products with cheaper prices through vigorous investments in R&D. Long-Term, 5 years
Environmental Factors

 

1.       Energy Consumption

2.       Carbon Footprint

 

Energy consumption targets, and lower carbon footprint are the main implication areas for this macro business factor. Ecological preservation, climate changes and lower carbon footprint are part of UK Legislation policies and targets. Short Term, > 3 years
Legal Factors

 

1.       National and International legal requirements after Brexit

2.       Monopolies and Cartels in EU regions

3.       Consumer legislation and Trade legislative Barriers.

After Brexit, different legal implications can pose hurdles to the operations of the MCIA industry in UK. It is important to former legislation before UK enters Brexit. If not it face trade barriers. Short term, < 2 year.

 

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