Us Auto Industry. Porter's Analysis
Individual Written Assignment
Porter’s Industry Analysis
US Automobile Industry
The US Automobile Industry is an ever changing industry since the early days of Ford’s revolutionary assembly line technique to current green technology and everything in between. Following are the 6 Porter’s Industry Analysis I have collected and analyzed.
The Threat of New Entrants 5.33 (high)
Economies of Scale; According to my research, the threat of new entrants is very low in the automobile industry. The industry has been established for a long time. If you need to be competitive, the company must be able to mass produce to reach a certain level of economies of scale to keep the production cost low, so that the automobiles can be affordable to the consumer.
Capital requirements; It takes an extreme amount of capital and a large sum of investment to manufacture the automobiles. For Example GM makes no profit on a $ 20000 vehicle, most of the income actually comes through the financing portion [1].
Access to distribution channels;. In order to sale their products, manufacturers must locate dealerships across different markets. Space is limited and unless they have their own dealership, it makes it very difficult for the manufacturer to show a large variety of their products to potential clients.
The Rivalry Among Existing Firms 5(high)
The biggest competitors are fairly equal in size which increases the rivalry. The only way to gain market share is by taking away customer from other competitors. The main reason for this rivalry is because they all provide the same product service with little differentiation. The industry is mature and saturated.
When the different manufacturers advertise they even compare their products to their competitors. For example, the commercials will focus on areas where the company outperforms its competitors. One of the most commonly used differentiations is examples such as; who had the Motor Trend Car of the Year [5], best mileage in
Porter’s Industry Analysis
US Automobile Industry
The US Automobile Industry is an ever changing industry since the early days of Ford’s revolutionary assembly line technique to current green technology and everything in between. Following are the 6 Porter’s Industry Analysis I have collected and analyzed.
The Threat of New Entrants 5.33 (high)
Economies of Scale; According to my research, the threat of new entrants is very low in the automobile industry. The industry has been established for a long time. If you need to be competitive, the company must be able to mass produce to reach a certain level of economies of scale to keep the production cost low, so that the automobiles can be affordable to the consumer.
Capital requirements; It takes an extreme amount of capital and a large sum of investment to manufacture the automobiles. For Example GM makes no profit on a $ 20000 vehicle, most of the income actually comes through the financing portion [1].
Access to distribution channels;. In order to sale their products, manufacturers must locate dealerships across different markets. Space is limited and unless they have their own dealership, it makes it very difficult for the manufacturer to show a large variety of their products to potential clients.
The Rivalry Among Existing Firms 5(high)
The biggest competitors are fairly equal in size which increases the rivalry. The only way to gain market share is by taking away customer from other competitors. The main reason for this rivalry is because they all provide the same product service with little differentiation. The industry is mature and saturated.
When the different manufacturers advertise they even compare their products to their competitors. For example, the commercials will focus on areas where the company outperforms its competitors. One of the most commonly used differentiations is examples such as; who had the Motor Trend Car of the Year [5], best mileage in
References: / Sources [1] How much does it really cost to make a $20,000 automobile? - Yahoo! Answers. 3/20/2011 [2] BTS | Executive Summary. 3/20/2011 [3] OICA; Production Statistics. 3/20/2011 < http://oica.net/category/production-statistics/> [4] CRS Report for Congress - U.S. Automotive Industry: Policy Overview and Recent History. 3/20/2011 [5] 2011 Automobiles of the Year - Best New Cars of 2011 - Motor Trend Magazine . 3/20/2011 < http://www.motortrend.com/oftheyear/04/2011/index.html >