Porter’s Five Forces Of Competition Analysis
The automotive industry has been facing huge challenges to keep sustain in the business. In this competitive era, auto industry needs to examine and determine the proper strategies to maintain its profitability and position in the market. To analysis the factors influencing the industry competitiveness, Porter (2008) in his article “The Five Competitive Forces that Shape Strategy” defined five key elements. To be successful, a company should consider its position in the industry environment on those elements. An examination of the industry environmental factors is very important for a company to determine its position within, identify the strengths in each competitive forces, then decide what …show more content…
Consumers can easily switch from one dealer to another auto dealer, with little costs, to get the best choice. The choices the buyers have on competing auto companies within the industry make the bargaining power of buyers becomes high, especially for direct consumers. However, as the dealerships buy vehicles directly to the auto manufacturers in a huge amount (Bloomberg), their purchasing can give significant impact to the automakers’ inventory and revenue if they reduce the buying quantity. The net effect for buyers’ power is …show more content…
3.5.4. Threat of Substitutes
An industry product can be substituted by a substitute product which has the same or similar function by a different means. A substitute can limit industry profitability and growth. Porter (2008) gives several key elements in determining the threat.
• The ability to offer attractive trade-off in terms of price and performance: Public transportation such as train, subway, bus, or airplane can give advantages to consumers, especially in the urban areas compared to driving a private car. These advantages are related to time, money, personal preference and convenience. The more expensive to operate the car, the more consumers will switch to alternative transportations. Thus, the threat of substitute is high.
• The buyer 's switching costs to get the substitute product: In cities and other areas where public transportations are well provided, there is a very little costs for consumers to switch between private and public transportation.
Generally, the threat of substitute in automotive industry is high.
3.5.5. Intensity of Existing
The automotive industry has been facing huge challenges to keep sustain in the business. In this competitive era, auto industry needs to examine and determine the proper strategies to maintain its profitability and position in the market. To analysis the factors influencing the industry competitiveness, Porter (2008) in his article “The Five Competitive Forces that Shape Strategy” defined five key elements. To be successful, a company should consider its position in the industry environment on those elements. An examination of the industry environmental factors is very important for a company to determine its position within, identify the strengths in each competitive forces, then decide what …show more content…
Consumers can easily switch from one dealer to another auto dealer, with little costs, to get the best choice. The choices the buyers have on competing auto companies within the industry make the bargaining power of buyers becomes high, especially for direct consumers. However, as the dealerships buy vehicles directly to the auto manufacturers in a huge amount (Bloomberg), their purchasing can give significant impact to the automakers’ inventory and revenue if they reduce the buying quantity. The net effect for buyers’ power is …show more content…
3.5.4. Threat of Substitutes
An industry product can be substituted by a substitute product which has the same or similar function by a different means. A substitute can limit industry profitability and growth. Porter (2008) gives several key elements in determining the threat.
• The ability to offer attractive trade-off in terms of price and performance: Public transportation such as train, subway, bus, or airplane can give advantages to consumers, especially in the urban areas compared to driving a private car. These advantages are related to time, money, personal preference and convenience. The more expensive to operate the car, the more consumers will switch to alternative transportations. Thus, the threat of substitute is high.
• The buyer 's switching costs to get the substitute product: In cities and other areas where public transportations are well provided, there is a very little costs for consumers to switch between private and public transportation.
Generally, the threat of substitute in automotive industry is high.
3.5.5. Intensity of Existing