INDUSTRIAL ANALYSIS: AUTOMOBILE INDUSTRY
-Praneeth Konduri (NSID- SRK591)
Automobile industry in the North America is a very established and was the world's biggest automobile industry for many years, during the 20th century, which was started with a number of companies in the early 1900's. But, as the time passed, many companies opted out the competition and some companies merged, and finally only three companies, namely Ford, General Motors, Chrysler stayed in the competition, taking advantage over other independent makers, because of their financial stability. The industry took different shapes and went through different phases-, the depression of the 30's, the stricter government regulations for automobile manufacturing in the 1960's to increase the safety, the 2008 crisis. A few foreign giants such as Honda and Toyota started their operations in the North American market in the 1980's and they are enjoying a good share in the automobile industry as well.
In order to analyze the whole automobile industry, Porter's five force Analysis, which was developed by Michael E. Porter in the 1980's, is used. Michael Porter is a current professor at the Harvard University.
The Porter's Five forces:
Threat of New Entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitutes
Competitive rivalry within the existing companies
Threat of New Entrants: As the North American is a mature industry, the established companies have a competitive advantage over the new companies. The Capital needed to flow in establishing a new automobile company is very high, for acquiring lands for manufacturing, assembling, advertising their products. But, as it is an established industry, the new entrants, who has access to high capital, will have an advantage too. The market trends can be observed, and market studies are readily available for the new entrants, so starting a company, with...