Does the company have a comparative advantage over its rivals?
Subaru has many rivals in the automotive industry, such as Ford, GMC, and Honda (Subaru Corp, 2022). When looking at the comparative advantage that Subaru has over its rivals, the most notable is its ability to provide consumers with standard all-wheel-drive (AWD) on all their vehicles. While their competitors' will upcharge for this feature, Subaru does not. They can produce all-wheel-drive powertrains at a lower opportunity cost. Because of this, Subaru is cashing in on the market shift to crossovers and has an all-wheel-drive lineup with their "go-anywhere" attitude (Flierl, 2017). A real-life example of this advantage is the comparison of Ford's 2022 Escape and Subaru's 2022 Forester. The Escape base model without AWD costs $27,025, and to have AWD drive added will cost upwards of $1,500. The Forester base model, on the other hand, is $25,895 with AWD.
Explain the supply and demand for its key product or service?
Subaru’s vehicles have an outstanding reputation and are known to last and retain value. Their most popular vehicle model is the Outback, with the Forester coming in a close second. Since Subaru has such an excellent reputation, its vehicles tend to have a high demand. However, in 2020 when the COVID-19 pandemic hit like most car manufacturers, the demand somewhat decreased. However, many consumers had their disposable income rise as they cut back on travel and another discretionary spending (Daly, 2021). Consumers saving money in other areas of their lives allowed them to purchase vehicles if they felt necessary, keeping the industry from crashing too much. As the American economy begins to recover from the pandemic, cars seem to fly off dealer’s lots at high rates, and the supply cannot keep up with the demand. Luckily, with the increased demand for Subaru vehicles before the pandemic, dealers are already experts in moving cars off the lots before entering the inventory. The current market makes dealers sell vehicles before they have even been made (Vellequette, 2021).
Provide the GDP of its home country and a key market (country).
Subaru’s headquarters are located in Japan, and at the end of its fiscal year in March of 2021, its total revenue was approximately $2.08 trillion (Gorka, 2022). The United States is Subaru’s key market, with $33 million in Subaru sales. Subaru sold roughly 598,480 vehicles in the United States in 2021 and 81,900 in Japan. The GDP of Japan is $4.94 trillion, while the GDP of the United States is $23 trillion (World Bank, 2022).
How do fluctuations in GDP, economic growth, investments, and patents affect the company’s profitability?
COVID-19 hit the entire world hard, and how each country handled the situation depended on how their economy was affected. During COVID, many people found themselves going out less, which meant that cars were not as necessary as they used to be. This decreased sales by 12.6% in 2020 at the pandemic's start (Walsh, 2022). However, sales have begun to increase as the world recovers from COVID. As people start to purchase vehicles again, interest rates come into play. The current average vehicle interest rate is 5.27% for a 60-month loan in the United States (Wamala, 2022). In addition, with the increasing demand for vehicles in recent months, prices have inflated. New cars, on average, have increased by 12.2% in the United States (Shen, 2022). Lastly, gas prices in the U.S. will affect car sales. Gas is now 50% more than it was in 2021 (Martin, 2022). If people cannot afford gas, there is no reason to have a vehicle. As gas prices rise, electric cars become more intriguing to consumers. Currently, Subaru does not have an electric vehicle on the market until 2022. This puts them behind other automotive companies hurting their profitability.
References
GDP (current US$) - Japan. World Bank. (2022). Retrieved from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=JP
GDP (current US$) - united states. World Bank. (2022). Retrieved from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US
Gorka, D. (2022, March 8). Subaru: Revenue 2021. Statista. Retrieved from https://www.statista.com/statistics/882573/subaru-net-sales/
Martin, E. (2022, June 10). Inflation Continues to Rise-and Gas Prices Are Up Nearly 50% Since Last Year. CNBC. Retrieved from https://www.cnbc.com/2022/06/10/inflation-continues-to-rise-gas-prices-up-nearly-50percent-since-last-year.html
Shen, M. (2022, February 14). Used Cars Cost 40.5% More Than Last Year as Gas Prices Rise. New Car Prices Also Climbing. USA Today. Retrieved from https://www.usatoday.com/story/money/cars/2022/02/13/used-cars-cost-more/6778705001/
Wamala, Y. (2022, February 28). Average Auto Loan Interest Rates: Facts & Figures. ValuePenguin. Retrieved from https://www.valuepenguin.com/auto-loans/average-auto-loaninterestrates#:~:text=The%20national%20average%20for%20US,risk%20in%20offering%20a%20loan.
Velleguette, L. P. (2021). Low Supply Means Selling Like Subaru: For Retailer, Tactics Work at Buick-GMC Store. Automotive News, 96(7009), S030.