Five Forces

· 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.

Michael Porter’s Five Forces Model is a useful tool to aid organizations facing the challenging decision of entering a new industry or industry segment. The Five Forces Model helps determine the relative attractiveness of an industry and

Porter’s five forces model describes 5 components. Buyer power, supplier power, threat of substitute products or services, threat of new entrants and rivalry among existing competitors. Using this scenario, I will explain every of these components.

Automobile industry is a faster growing industry nowadays than any other industry. Most car manufacturers face the challenge of providing the best quality products to remain competitive to retain or regain market share during this tough economic times. Every organization has the opportunity to make more profit than their competitors do by improving delivery method and its impact on the company’s turnover. Toyota Corporation has implemented different plans and techniques to remain competitive and make profit. One of the innovative plans Toyota Corp. created is the Prius. The Prius brought about a major revolution in car manufacturing industry, and opened a place in the market

Competition in the automobile industries is very high, because there are many firms in this industry which offer many choices. One key factor of the challenging automotive industry has been globalization. Globalization has increased cost burdens on the industry by growing competition between international and domestic manufacturers. Each firm is trying to do its best to exploit their competitive advantage and create niches to differentiate themselves from the other companies. Toyota, Ford, General Motors

Hundreds of automobile companies exist today. Many companies are successful and are now well known brands around the world, while some have failed to keep a good reputation, lost all customers and have fallen and are now forgotten. This is the beauty of competition, an essential to economies.

The Demand for cars are increasing day by day and the trend that is seen in the market is that the customer preference is shifting towards the Maruti car brand. This is an issue for the other car brands to gain market share. Statistics show that the market share of the Maruti car brand has gone up to 40%. Although this is a positive sign for Maruti, this may not be a promising situation for other car brands. The study helps to focus on the key aspects that influence the customer preference of Maruti so that the other car brands may follow the leader and compete in the market.

Increasing disposable income and availability of better alternatives have raised the customer expectations and array of choice. This has led to a decline in consumer loyalty towards particular vehicle brand. The bargaining power is enjoyed highly by Indian consumers.

Toyota has various global branch offices in the world and it supports the company by having a strong market position. Toyota’s markets for two most recognized brands Lexus and Toyota and could be considered as great market share in different regions such as in North America, in Asia excluding Japan, in Europe, in China, and etc. This helps Toyota have a better competitive advantages and opportunities of growing in global marketplace. Toyota also concentrates on Research & Development in the global facilities in order to enhance quality of service and product functionality, thus increasing product safety. A good strength is based on the innovation of current products, development of new products and manufacturing process. This strength supports Toyota in incorporating modern attributes such as technology to current range of products and other related fields, maintaining technical and innovative leadership in its automotive

The Porter 's Five Forces model is an "outside looking in" forte unit technique contraption that is used to make an examination of the captivating quality or estimation of an industry structure.

The Five Forces model is a framework for analyzing the competitive environment in which a company works and therefore determining its profit potential. (The Economic Times) The framework is a tool designed by Michael Porter, which states that there are four separate forces: “The Threat of Entry”; “Supplier power”; “Buyer power”; “Threat of substitutes” and the “Degree of Rivalry.” (Porter’s Five Forces) This model can assist both new and existing companies in determining the profitability of a new product line and or a start up business. For example, an entrepreneur looking to develop a new business plan for marketing a particular set of clothing (e.g., t-shirts) both domestically and internationally will put his or her plan through the five forces frame work in order to determine the possible future success of his or her company based on the current market.

Five Forces Model framework developed by Professor Michael, E. Porter of Harvard Business School in 1979, is a powerful strategic business assessment tool useful in strategic assessment of business position in a volatile competitive market situation to understand where the business competitive power positions and analyze both the current competitive strength and the position which the business is intended to move into to gain profitability while and customer’s desirability’s.

Honda, Toyota, Nissan, and Hyundai have similar vehicles and are routinely compared to each other. Honda makes the Accord, Toyota has the Camry, Nissan has the Maxima, and Hyundai produces the Sonata. All are considered in the same class. Marketing of the companies themselves, all indicate they are comparable. The degree of rivalry continues to increase as new technology develops, environmental concerns rise, and the economy challenges the market. The automotive industry is considered to be an oligopoly, which helps to minimize the effects of price-based competition. The competition between the companies continues to intensify due to the changes in the economy. The companies use rebates, financing, long-term warranties, and recently the guarantee to make payment or return the vehicle should the consumer lose their job. This is definitely a sign of the times. The automotive companies compare themselves to each other. In their advertising campaigns, the companies point out the weakness of the other company and stressing their strength compared to the other companies.

Toyota is a key player in global automotive market. Its structure constitutes if various production plants in different locations and a very strong branding which helps it capture a major market share. Like other enterprises, Toyota has several strengths and weakness which makes it what it is now. Toyota heavily invests in Research and development which helps it come up reputable product line which is spread out throughout the world because of its strengthening global distribution network however its recent product recalling, loose grip in key geographic areas and wrong allocation of resources shows that even a strong brand like Toyota has its weaknesses.

The rivalry between companies is very tough and aggressive and especially between the three brand leaders:Mercedes Benz, BMW and Audi. They compete very hard and aggressive to achieve the market leadership in all the major markets and trying to be recognised as the top luxury brand in customers’ perception. Moreover, the competition has spread out from the advanced markets to the emerging markets, where each company hopes to take advantage of the future growth. The three companies recognise each other as competitors, and their public statements and advertising campaigns make provocative comparison between the cars as to performance and innovation. Technology innovation is one of the fields of competition, as each of them claims to be