Case Study Analysis-Toyota

3795 Words Jun 20th, 2007 16 Pages
Executive Summary

Automobile industry is faster growing industry nowadays than other industry. Industry analysis by Porter 's five forces can be said that threat of new entrants is low due to huge capital and cutting-edge technology. Suppliers are weak because they are spread all over the world and cannot easily forward integrate. Buyers are weak due to low demand for non-consumer goods (automobile) and high switching costs; moreover, buyers are not able to backward integrate. Substitutes are moderately strong due to different and less-expensive transportation facilities. On the other hand, intensity of rivalry is strong because of major players are dominant in the market by nearly same technology and manufacturing processes, suppliers
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Suppliers bargaining power  WEAK
• Automobile manufacturers ' supplier would usually have one major contract  the automobile manufacturer would be able to dominate negotiations.
• Suppliers in this market are often small-medium companies and there are quite a lot of them  Easy for Auto manufacturer to switch
• Switching costs are low because of the size of supplier.
• Most automobile manufacturers able to integrate backward. For example Hyundai has no suppliers of components as it used backward integration and this transition was successful.

Buyers bargaining power  WEAK
• Concentration of buyers is widely dispersed.
• Shear volume of customers means that one individual customer has absolutely no power.
• Forward integration from buyers are low due to heavy capital, resources and skilled labour.
• Buyers demand is growing slowly as car is expensive and it is not consumers goods

Threat of substitutes  STRONG
• There are many substitutes against motorcar. Eg:

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