Gm Porter's Five Forces

Topics: General Motors, Renault, Automotive industry Pages: 3 (901 words) Published: May 4, 2012
For the analysis of GM and its environment Porter’s Five Forces will be used. This tool is primarily used to analyze the competitive environment in terms of five main categories; the threat of new entrants, bargaining power of both supplier and buyers, threat of substitute products and how intense the current rivalry is among existing competitors. In each of the five categories there are conditions/ sources that further provide insight to each; they will be analyzed in terms the car industry. This model is very helpful in determining what are an organizations next steps. It provides insight in to whether a particular firm should exit or stay in an industry given its profit potentials. Lastly this model also helps firms to identify areas where they can change the competitive environment, again, to improve future profits. The car industry is a very well known industry. Even more so with the government’s involvement in most of the US car corporations during the economic crisis, as well as due to the current prices of oil and their move toward greener more efficient vehicles. General Motor’s represents these characteristics therefore analyzing it in terms of Porter’s Five Forces will be a helpful and relevant exercise. First, the threat of new entrants or the barriers to entry in to the industry are very large. The capital requirements to become a new player in the industry are very restrictive due to the large amounts that would be required. Moreover a car manufacturing facility, in the event of failure, can’t be easily adapted to work as something else. Product differentiation and loyalty is important in the industry, I do no mean loyalty in the sense that people will not change car brands but loyalty in terms of the already established brands. It is not an easy task to gain a good reputation for a new up and coming car brands, in terms of safety, reliability, maintenance etc. these represents large barrier to overcome. Bargaining power of buyers refers to the...
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