Automotive Industry And Porter 's Five Forces

1368 WordsJul 26, 20176 Pages
Automotive Industry and Porter’s Five Forces Shawn D Schubach American Military University Abstract According to the AMA dictionary of Business and Management (2013), Porter’s Five Forces can be described as a “Framework developed by business professor Michael Porter for analyzing the balance of power within a particular industry and its profitability. The following are the five forces: Bargaining Power of Buyers, Bargaining Power of Suppliers, Competitive Rivalry in the Industry, Threat of New Entrants, and Threat of Substitutes.Porter originally developed the five forces to explain why the structures of some industries lead to exceptional profitability, and other structures do not (Kiechel III, 2010). Wilson (2015)…show more content…
Automotive Industry Defined Binder & Rae (2017) defined the automotive industry as an industry that consists of all companies and activities involved in the manufacturing of motor vehicles. It is key to note that this includes aspects such as the building of components such as engines, and bodies of automobiles, but, according to Binder & Rae, excludes aspects such has tires, batteries, and fuel. Binder & Rae states that the primary products that the automotive industry manufactures are passenger automobiles and light trucks, and commercial vehicles. Automotive Industry Profile & Outlook Ferro (2015) identifies that the automotive industry is both capital and labor-intensive. This is shown through the management of costs and expenses associated with the manufacturing of vehicles (e.g., facilities, materials, parts, equipment, product development, and employment). Further, Ferro discusses that the prices of key raw materials, such as steel, can fluctuate which requires the industry to be strategically flexible. In the United States the automotive industry is the “largest single manufacturing enterprise in terms of total value of products, value added by manufacture, and number of wage earners employed,” according to Binder & Rae (2017). As well, Bind & Rae state that one of every six American
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