Threat Of New Entrants : Low

2033 Words Sep 18th, 2014 9 Pages
I. Threat of New Entrants: Low
a. Government Polices: During the days when the Big Three (Ford, General Motors and Chrysler) controlled 85 percent of the world’s auto production, automotive safety was given little consideration (Michaels). Whether driven by cost or genuine concern of market rejection, automakers for years resisted even the most basic precautions (Michaels). This all changed in the 1960s when the Nation Academies of Sciences released a watershed report that highlighted the danger of the automobile and the industry’s reluctance for safety measures. Therefore, this caused many government policies to be in acted to protect innocent citizen driving motor vehicles, such as the Highway Safety Act and Low Volume Motor Vehicle Manufacturer’s Act (Michaels). Today in 2014 though, there are more than just safety standards and acts that effects the automotive industry. Automakers have to be conscious of import regulations, emission standards and fuel economy standards set by the government (Business Guide by Industry: Automotive). That beginning said, government policies are one of the highest barriers that cause low threats of new entrants of the automotive industry.
b. Amount of Capital Required: The automotive industry’s low threats of new entrants is also caused by the extremely high amount of capital required. The major cost for producing and selling automobiles include labor, materials, and research and development (The Industry Handbook: Automobiles). While…
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