Porter’s Five Forces On Automobile Industry

Automobile Industry Is very specific industry, thus It has higher level of entry barriers. For an example Factory facilities, machinery, labor, technology are heavily Involved. So following factors are determine the barriers of entry to the Industry: Bargaining Power of buyers affects industry profitability by their ability to hold out for lower price, higher quality, and better service. In automobile industry the bargaining power of the buyers is moderately high.

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The factors that affect consumer to make a buying decision are the appearance, quality, price, and environmental effect. Based on a variety of the lifestyles; people choose to purchase a vehicle in a different way. 1. There are various brands and models of the cars to choose from nowadays and the buyers have low switching cost due to the various brands with similar specs and price with competitive marketing. 2. The reasons why the power is not completely high is that the buyers are not large and few in number. 3. The buyers do not have the ability to integrate backwards onto the industry.

Bargaining Power of Suppliers Suppliers can exert a competitive force in an industry by raising prices or reducing the quality of the goods they sell. The bargaining power of suppliers is very low in the automobile Industry. There are so many parts that are used to produce an automobile, that It takes many suppliers to accomplish this. When there are many suppliers In an Industry, they do not have much power due to that Industry manufactures can easily switch to another supplier If It Is necessary. For example, T Toyota has more than 10 different suppliers in US.

The main qualifications of the suppliers are the quality, cost, and delivery of the products. If suppliers can’t meet those basic considerations, it is hard for them to survive. Rivalry among Existing Firms New entrants to automobile industry bring new capacity a desire to gain market share and substantial resources. Rivalry between firms automobile industry get customers several advantages changing prices, improving product differentiation, creatively using channels of distribution, exploiting relationship with suppliers, for example of competition between BMW and Benz car market.

The intensity of rivalry Is Influenced by the automobile Industry: Lager number of firms: resources. Rate of market growth:-causes firms to fight for market share in a growing market. Amount fixed costs:-result in an economy of scale effect that increases rivalry. When total costs are mostly fixed costs. Height exit barriers:-a common exit barrier is asset specificity. Some automobile production plant and equipment can’t easily sell to other buyers in another industry.

Diversity of rivals:-with different cultures, histories, and philosophies make an industry unstable. Threats of Substitute Product or Services Products are appear different but can satisfy the same need as another product. Product differentiation is more important. In the car industry typically there are many cars that are similar Just look at any mid-range Toyota and you can easily find a very similar Ionians, Honda, or Mazda. High functional similarity. Product image associated with many important factors. Mostly high product switching costs