BUS225_Project_One

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Feb 20, 2024

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1 Project One: Executive Summary Lauren Cormier Southern New Hampshire University BUS 225: Critical Business Skills for Success Kim Nagle September 20, 2023
2 Project One: Executive Summary Problem In this executive summary, we will address trends for a company that builds engines for the automotive manufacturing industry as well as look into the diversification into aftermarket services. The company needs to diversify so that it may continue to grow and be in a wide range of automotive services. Furthermore the problem that diversifying the company will solve will also be solving the yearned increase in portfolio and revenue size. The kinds of quantitative and qualitative data that I will target in my research on the current auto industry as well as the aftermarket industry are: overall attractiveness, industry net worth, market trends (past, present, and, future), potential risks, market sales, industry competitors, and growth potential. Automotive Manufacturing Industry Total value of the automobile industry as of 2022 was $327.3 billion (MarketLine, 2023). From 2021 to 2022 the automobile industry rose 10.5% and is projected to hit $416.3 billion by 2027 which would be a 27.2% increase from 2022(MarketLine, 2023). Sales by types of vehicle sold are as follows: cars 35.43% of total sales of just over $100.6 million, SUVs at 36.36% or $103.2 million, pickups just over $59 million or 20.81%, and finally vans/ minivans at 5.54% or $15.7 million; the total amount for automobiles sold in 2022 were of $1.2 trillion (Alliance, 2023). Sales by fuel type are as follows: ICE/ Hybrid 98.91% (280.5 million), electric .76% (2.1 million), plugin hybrid .33% (936,878), and lastly fuel cell vehicles sold were about 13, 862 less than 1% (Alliance, 2023). Furthermore, top 5 states as of 2022 automobile sales were California, Texas, Florida, New York, and Pennsylvania ranging from $142.6 billion to $46.3 billion respectfully (Alliance, 2023). Lastly, the bottom 5 states for automobile sales were Vermont, South Dakota, Alaska, North Dakota, and Wyoming, which ranged from $3.1 billion on the high end to $1.8 billion (Alliance, 2023). Trends in products such as fuel to hybrid and electric vehicles are changing drastically. Hybrid and electric vehicles have changed production processes, as more people become climate conscious and government assistance boosts them to the front of the industry (IBIS World, 2023). Furthermore, these EV technological vehicles are becoming more affordable and as natural resources continue to die off, environmental restrictions will become even more strict and it is foreseen that electric vehicles will be dominating this market (BIS World, 2023). That being said, SUV and car sales have increased due to the ability for them to be more environmentally friendly, and more available safety features. A few of these safety features are back seat awareness, crash avoidance and protection through road safety spectrums, and innovations to keep drivers more focused. New Industry
3 The aftermarket service industry grew by 2.8% in 2022 to reach a value of just over $178 million, this industry is forecasted to increase by 17.2% by 2027 to a value of just over $209 million (MarketLine, 2023). As for competition, aftermarket services is highly competitive due to name recognition, product availability, store location, customer service, and of course price. Competitors do not just stop locally but also nationally, regionally, as well as wholesale distributors and online retailers. The United States make up 23.5% of the aftermarket sector value (MarketLine, 2023). Aftermarket services can include, but are not limited to, Alloy Wheels, Bumpers, Doors, Exhaust Systems, Floor Mats, In Car Entertainment, Paints And Solvents, Roof Bars, Satellite Navigation, Shock Absorbers, Tow Bars, and Tires. As with the automobile industry, during COVID in 2020 aftermarket sales were at an all time low dropping 17.7% what they currently are as of 2022 (MarketLine, 2023). While the industry is projecting a 5.8% growth in the upcoming years, the market is currently considered moderate to stable. Trending demands are for electric vehicles, therefore, top companies are investing in newer technologies and network expansions to meet these quotas (MarketLine, 2023). Porter’s Five Forces Analysis of the New and Automotive Industry New Industry Automotive Manufacturing Industry Rivalry among existing competitors Rivalry amongst retailers in the aftermarket service industry are split between retail specialists and garages. Some companies, such as Michelin, AutoZone, and Advanced Auto Parts, are geographically diversified, which protects them from overexposure to a specific geographic market, that being said, garages tend to be smaller or locally owned. Though ,as previously mentioned, there are many products and services offered through most all retailers, the major players increase rivalry by making in harder to offer differentiated products and attract new customers. The industry is witnessing strong pricing competition and any kind of competitive price pressure could potentially affect the operating There are currently a collective amount of competitors that supply engines for the automotive manufacturing industry. These companies and their shares are as follows: Ford Motor Co. 37.1%, Honda Motor Co. 16.2%, Toyota 9.9%, General Motors 9%, Magna International Inc. 7.6%, MALHE Intl. 6.1%, Other Companies 5.8%, Altra Industrial Motion Corp. 4.9%, Stellantis N.V. 3%, and Agility Fuel Solutions at <1% (Pantalon, 2023). Most manufacturers often control their own patents of specific designs for their company therefore, control of prices is strict due to lack of competition. Companies compete to provide constant innovation especially due to new environmental restrictions.
4 results, profitability, and financial position (MarketLine, 2023). Furthermore, both retailers and large players in this industry are becoming or entering the online side of this operation. Sites like eBay and Amazon have created venues for wholesalers and manufacturers to sell more directly to end users which causes an increase in rivalry in this sector. Threats of new entrants to the market With the internet and online retailers, entry to the aftermarket services industry is relatively easy. Whether one wants to enter this industry as a garage or a parts retailer entry costs are low and legal barriers mostly consist of titles, leans, and local regulations. Entrants that wish to become parts and accessories retailers will face more competition, however, those entrants that are considering opening a garage, while they will have to hire a knowledgeable staff, will see less competition but more success (MarketLine, 2023). While our current company sells automotive engines for vehicles, I feel as though we would be just as prepared as other companies to enter this industry. Companies face barriers such as large corporations with more than 75% of market shares when beginning to supply engines to the automotive manufacturing industry (Pantalon, 2023). New regulations with electric vehicles and environmental concerns from the government make for increased difficulty for new entrants. High costs are associated with gaining the expertise necessary to produce goods as well as provide services due to the tight market. There are a low rate of companies entering this side of the industry due to the difficulty of entry. Bargaining power of suppliers Bargaining power of suppliers is high in the aftermarket service industry due to the limited number of large manufacturers of replacement automotive parts. These large manufacturers include international brands and can Raw materials that are used for automobile manufacturing are aluminum and iron, therefore; metal manufacturers are the suppliers. These suppliers are bountiful and are only held back by the ability to procure raw materials as
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