Consumer Power Of Buyers On Automotive Industry

934 Words4 Pages
· manufacturers in a huge amount (Bloomberg), their purchasing can give significant impact to the automakers’ inventory and revenue if they reduce the buying quantity. The net effect for buyers’ power is moderate. · The standardization of industry product: Vehicles products are standardized even though we still can find some differentiation between auto companies. For the consumers who feel they can find the equivalent vehicles between companies, they will compare them. However, since there are brand loyalty among the consumers in choosing a vehicle related to its differentiation, the switching costs for consumers may be high. Thus, the bargaining power of buyers seems to be moderate. · The threat from buyers to integrate backward and produce the industry product themselves: Since barriers to entry for automotive industry is high, this threat seems to be difficult to happen, therefore lowering the buyer’s power. Based on some considerations above, the bargaining power of buyers on automotive industry is moderate. 3.5.4. Threat of Substitutes An industry product can be substituted by a substitute product which has the same or similar function by a different means. A substitute can limit industry profitability and growth. Porter (2008) gives several key elements on determining the threat. · The ability to offer attractive trade-off in terms of price and performance: Public transportation such as train, subway, bus, or airplane can give
Open Document