Global Automotive Industry- Porter's 5 Forces

1042 WordsJul 12, 20115 Pages
Porter’s Five Forces Analysis Michael Porter identified five forces that influence an industry. These forces are: (1) degree of rivalry; (2) threat of substitutes; (3) barriers to entry; (4) buyer power; and (5) supplier power. For more on this framework proposed by Porter, please see Appendix C. Like other industries operating under free market, capitalistic systems, viewing the automotive industry through the lens of Porter’s Five Forces can be helpful in understanding the forces at play. Degree of Rivalry Despite the high concentration ratios seen in the U.S. market, which typically signify that a lesser degree of competition is seen in the industry, rivalry in the U.S. and the global automotive industry is intense. Clearly, the…show more content…
The switching costs associated with using a different mode of transportation, such as train, may be high in terms of personal time (i.e., independence), convenience, and utility (e.g., luggage capacity), but not necessarily monetarily (e.g., round trip train fare on MARTA would most likely be less expensive than the cost of fuel consumed on a similar round trip, daily parking, car insurance, and maintenance). The exception to this statement occurs in the global urban areas with high population densities. In these areas, the substitutes available (e.g., walking, mass transit, bicycles, etc.) can be less costly than automobiles and thus alternative modes of transportation are often preferred. Also, there are inherent underlying social and cultural attitudes that keep people from owning automobiles in some parts of the world. Many nations are not as spread out or as mobile as the U.S.; they are constrained either by geography, race, class, or religion and the need for personal transportation is not as great, yet. The American dream of “a car [or two] in every garage” is not what the rest of the world currently wants or needs. However, the marketing arms of the global automotive manufacturers are certainly working very hard to change this paradigm, and with unprecedented production volumes world wide, all signs indicate that they are succeeding. Most with the ability and means to own a vehicle, who live in a society with the necessary infrastructure (e.g., roads and

More about Global Automotive Industry- Porter's 5 Forces

Open Document