A. Threats of New Entrants
Threats of new entrants are moderate because entry to the automotive industry is unlikely to be successful on a small scale because huge amount of capital is needed in order to set-up large-scale production plants. Aside from that, factors including difficulty in accessing distribution channels are a problem because dealers and distributors tend to stock well-established branded automobiles as an answer to the demand of the consumers. Aside from that, top players in the market, including the 5 stated in this paper hold licenses to use numerous patents, copyrights and trademarks which focus on engineering and technical expertise to maintain their competitive advantage through innovations. In addition, there are different governmental standards and regulations that are connected to safety, fuel economy, emissions control, noise control, vehicle recycling, substance of concern, engines and equipment manufactured for sale in the world. Above all, manufacturing and other assembly facilities are subject to different stringent standards which regulate air emissions, water discharges and waste management (Datamonitor, 2008).
B. Bargaining Power of Buyers
Buyers in the automotive industry are commonly large companies with a vital financial power. Therefore, they can be authorized dealer for a number of manufactures and they can make large purchases and put pressure on market players in order to reduce prices. However, the brand strength or the image of the brands weaken the buyer power, because the leading car manufacturer have already established their relationship with the customers, thus, buyers are more likely to enter into different contracts with specific manufacturers to meet the demand of the customers, at the same time, increase sales. Aside from that, there are number of market players that have integrated forward into retailing, which put pressures on buyers (Datamonitor, 2008).
C. Bargaining Power of Suppliers
Inputs to the global automobiles market include a variety of raw materials, assembled and semi-assembled components, energy, freight and transportation. On the other hand, suppliers have a strong power over the industry because the suppliers, which are commonly large companies, are not dependent on the automotive industry but operate in a diverse market. In addition, the power of supplier is being strengthened because the automotive industry requires raw materials of high quality. However, this is complemented because motor car manufacturers does not focus on one suppliers, thus reliance to suppliers keep to minimum by using wide range of companies as their suppliers (Datamonitor, 2008).
D. Threats of Substitutes
The presence of used car market is a threatening player in the new cars market. As a matter of fact, the volume of used car sold had exceeded that of the new cars market. However, this lessens because most of car manufacturers are focusing on producing affordable new cars. On the other hand, with connection with the awareness of environmental issues, people tend to substitute automobiles for more environmentally friendly forms of transport such as walking, cycling and even public transportation. However, the said substitute is unlikely to happen on a large scale or to become a complete substitute for automobile, thus it does not have that much impact on the industry (Datamonitor, 2008).
Furthermore, hybrid is growing in terms of sales, however market players play a vital role in the said green market (Datamonitor, 2008), therefore, making the threat of substitute low.
E. Rivalry among Existing Firms
It is important to consider that the global automobiles industry is highly concentrated with the top three players in the industry, which holds 40% of the entire market value. Competition is increasing and intensifying because different developed and newly developed countries such as Japan and Korea are starting to compete in the global market. Aside from that, most of car manufacturers are now ramping in terms of production which put pressures on their rivals. Besides, the industry is becoming consolidated because increase in raw material cost resulted to increase in production costs and put pressure on the players in the market (Datamonitor, 2008). Therefore the rivalry in the industry is strong.
VI. Conclusion
After analyzing the information gathered, it had been found out that the industry is facing problems because of the current financial crisis. Customers tend to save money and stop buying cars for the future. As a result, the sale of automobile is forecasted to decline. On the other hand, because of the said financial crisis, people tend to go for second-hand cars, cycling, walking and transportation. However, the said factors do not have a long-lasting and strong impact because of the current effort of major players in the industry including introduction of affordable and reliable cars in the market. Furthermore, most of companies are also focusing on green market, which enables them to manufacture and sell hybrid cars, as an answer to the concerns of the customer towards the different environment issues.
VII. References
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Collins, S. (2006, April 20). International Trade Commission (ITC) Public Hearing on the Economic Effects of a US – Korea FTA on the US Automotive Industry. Retrieved May 4, 2009, from Automotive Trade Policy Council: http://www.keia.org/images/04.AutomotiveTradePolicyCouncilRemarks.pdf
Datamonitor. (2008). Global Automobiles. Retrieved May 4, 2009, from Datamonitor: http://www.datamonitor.com/
Evans, F., & Bishop, D. (2001). Valuation for M & A: Building Value in Private Companies. John Wiley and Sons.
Györffi, M. (2006). Common Policies. Retrieved May 4, 2009, from European Parliament: http://www.europarl.europa.eu/parliament/expert/displayFtu.do?id=74&ftuId=FTU_4.8.4.html&language=en
Haberberg, A., & Rieple, A. (2008). Strategic Management: Theory and Application. Oxford University Press.
Hsu, J. (2002, July 1). Globalization Withint the Auto Industry: A Major Benefit of Globalization for GM has been Access… Retrieved May 5, 2009, from AllBusiness: http://www.allbusiness.com/management/benchmarking-key-business-process-benchmarking/219142-1.html
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VIII. Appendices Appendix A: Automotive Industry and the Economy of the World
(2004 or latest available figures)
(In Million)
Turnover
Investments
Public Revenue
Argentina
3,519*
Australia
18,929
887
Austria
13,900
580
8,315
Belgium
18,225
302
7,155
Brazil
26,997
1,141
Canada
77,469*
2,496**
9,701
China
86,984
5,330
Croatia
205
20
1
Czech Rep.
12,091
663
1,032
Denmark
1,165
46
5,867
Egypt
2,901
1,661
1,911
Finland
1,076
36
3,807
France
111,901
4,196
34,000
Germany
227,666
11,900
44,314
Greece
162
17
3,200
Hungary
8,144
432
India
16,893
1,014
11,122
Indonesia
3,858
1,071
Italy
54,135
3,450
40,954
Japan
435,610
6,450
66,444
Korea
62,993
2,239
16,615
Malaysia
6,084
1,263
Mexico
3,348
Netherlands
7,876
81
10,837
Poland
16,202
893
Portugal
4,457
176
6,897
Romania
1,836
308
Russia
7,019
223
654
Slovakia
8,711
1,056
Slovenia
1,544
40
South Africa
20,602
277
3,459
Spain
75,104
277
3,459
Sweden
24,784
861
5,590
Switzerland
4,252
4,689
Thailand
116,58*
443
2,871
Turkey
28,196
502
10,127
UK
58,238
1,590
46,099
USA
425,106
30,416
64,289
Total
1,889,840
84,801
433,160
* gross productive value ** gross fixed capital formation
Source: (OICA, 2006)
Appendix B: 2007 Car Production Statistics
Country
Cars
Commercial Vehicles
Total
% Change
Argentina
350,735
193,912
544,647
26.0%
Australia
283,348
51,269
334,617
0.9%
Austria
199,969
28,097
228,066
-17%
Belgium
789,674
44,729
834,403
-9.1%
Belgium
789,674
44,729
834,403
-9.1%
Brazil
2,388,402
582,416
2,970,818
13.8%
Canada
1,342,133
1,236,105
2,578,238
0.3%
China
6,381,116
2,501,340
8,882,456
22.0%
Czech Rep.
925,778
12,749
938,527
9.8%
Egypt
67,149
36,403
103,552
13.1%
Finland
24,000
303
24,303
-25.8%
France
2,550,869
464,985
3,015,854
-4.8%
Germany
5,709,139
504,321
6,213,460
6.8%
Hungary
287,982
4,045
292,027
53.5%
India
1,707,839
598,929
2,306,768
14.4%
Indonesia
309,208
103,580
412,788
39%
Iran
882,000
115,240
997,240
10.3%
Italy
910,860
373,452
1,284,312
6.0%
Japan
9,944,637
1,651,690
11,596,327
1.0%
Malaysia
347,971
93,690
441,661
-12.2%
Mexico
1,209,097
886,148
2,095,245
2.4%
Netherlands
61,912
76,656
138,568
-13.1%
Poland
695,000
89,700
784,700
9.8%
Portugal
134,047
42,195
176,242
-22.5%
Romania
234,103
7,609
241,712
13.2%
Russia
1,288,652
371,468
1,660,120
10.4%
Serbia
8,236
1,667
9,903
-11.4%
Slovakia
571,071
0
571,071
93.3%
Slovenia
174,209
24,193
198,402
29.6%
South Africa
276,018
258,472
534,490
-9.1%
South Korea
3,723,482
362,826
4,086,308
6.4%
Spain
2,195,780
693,923
2,889,703
4.0%
Sweden
316,850
49,170
366,020
9.9%
Taiwan
212,685
70,354
283,039
-6.7%
Thailand
315,444
971,902
1,287,346
7.8%
Turkey
634,883
464,531
1,099,414
11.3%
Ukraine
380,061
22,530
402,591
39.7%
UK
1,534,567
215,686
1,750,253
6.1%
USA
3,924,268
6,856,461
10,780,729
-4.5%
Uzbekistan
170,000
14,900
184,900
68.1%
Others
429,430
168,466
597,896
12.5%
Total
53,049,391
20,103,305
73,152,696
5.7%
Source: (2007 Production Statistics, 2007)
Appendix C: Direct Employment in Automotive Industry
Countries
Employment
Countries
Employment
Argentina
12,166
Korea
246,900
Australia
43,000
Malaysia
47,000
Austria
32,000
Mexico
137,000
Belgium
45,600
Netherlands
24,500
Brazil
289,082
Poland
94,000
Canada
159,000
Portugal
22,800
China
1,605,000
Romania
59,000
Croatia
4,861
Russia
755,000
Czech Rep.
101,500
Serbia
14,454
Denmark
6,300
Slovakia
57,376
Egypt
73,200
Slovenia
7,900
Finland
6,530
South Africa
112,300
France
304,000
Spain
330,000
Germany
773,217
Sweden
140,000
Greece
2,219
Switzerland
15,500
Hungary
40,800
Thailand
182,300
India
270,000
Turkey
230,736
Indonesia
64,000
UK
213,000
Italy
196,000
USA
954,210
Japan
725,000
Grand Total (39 countries only)
8,397,451
Appendix D: Market Share
Company
Share (%)
Toyota Motor Corporation
15%
Ford Motor Company
12%
General Motors Corporation
11.40%
Daimler AG
10.30%
Other
51.30%
Total
100%
Source: (Global Automobiles, 2008)
Credit:ivythesis.typepad.com
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