Porter's Five Forces On Automobile Industry

Topics: Renault, Barriers to entry, Mercedes-Benz Pages: 2 (532 words) Published: January 16, 2015
Porter's Five Forces On Automobile Industry
Threats of new entrants:
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. 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 into 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, 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...
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