American AutomobileIndustry Analysis Maurice Kirk ECON 600American University Abstract Thefollowing analysis focuses on the American automotive industry, specifically,on manufacturers of large variety automobiles.
The automobile industry has veryintriguing: it is competitive, its vast inn size and is always changing withthe times. In the future it is projected the automotive industry would be themost changed industry of our time. Thisanalysis includes an Porter’s Five Forces Strategy Analysis as it applies tothe Auto Industry .
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The outcomes are very considerable when comes to thismarket as a whole . Definition The automotiveindustry is a widerange of companies and organizations involved in the design, development,manufacturing, marketing, and selling of motor vehicles, some of them are called automakers. It is one of theworld’s most important economic sectors by revenue. The automotive industrydoes not include the industries that are dedicated to the upkeep of the automobile.Such as places like repair shops and gas stations. Market Structure TheAmerican Automotive Industry market structure solely effects the economy ofAmerica in a major way. The oligopolistic market is the type of market that it belongsto.
An oligopoly is a market structure where a few firms dominate. Even thougha few firms dominate it is also possible that smaller firms can be a part ofthe market. In the American automobile industry,it would be a couple big named car companies. These companies would be General Motors,Ford and Chrysler. There are also a few foreign competitors in this market structure.
These companies include Toyota, Honda, Hyundai & Nissan. Future Outlook The future outlook forthe American Automobile industry is good. This is due to the market of the industryis constantly evolving and never remaining stagnant. The automotive industryhas never stayed the same.
Even after the recession in 2009 the American automobileindustry continued to try flourish even with the bad economic situation thatwas at hand. Since has been a constanttrend with the growth and change to the American Automobile Industry the futureis projected to be good. There will be a lot of change that comes with it as well.This is due to the demand in the economy of hybrid, gas alternatives, and fuel efficientmodels of cars. Here is a chart of the projections for the future outlook ofthe American Automobile Industry. Porter’s Five Forces Strategy Analysis as it appliesto the Auto Industry The American Automotive industryglobally is a multi-billion-dollar industry, even though it is highlycompetitive with a large number of competitors trying to leverage off theadvantages to gain majority or completely owned the market share. Here I willdiscuss the key factors that are imperative for the American automotiveindustry to be successful.
Let’s now examine Porter’s Five Forces Strategyanalysis as it applies to the Auto Industry. Bargaining Power ofBuyers Buyer power is the ability of individualcustomers to negotiate prices that will profit from the seller. Privateindividuals, commercial companies and governments are the primary buyers ofmotor vehicles. Buyers have the ability to not make a choice on a decision.
Itis different for the manufacturer of the product. Customers easily influencethe market by having the option to go to another dealer and their options notbeing limited to one dealer. The power of buyers is high. New customers like to explore theiroptions instead of making a decision on at one place. Also the price fluctuationplays a major role by giving the customer (the buyer) different options.
Theoutcome is the effect is high buyer power. Bargaining Power ofSuppliers The power of suppliers is solely basedon the demand of potential product in the industry. The cost is severely effectedbecause of the different options of the types of parts. Auto manufacturers require inputs-labor, parts,raw materials and services.
The cost of these inputs can have a significanteffect on profitability. Ford was depended on different suppliers for variousparts but soon it had the problem with the quality of equipment’s andcompatibility of parts made by different manufacturers became too expensive asit was costing more comparing to buying from suppliers Several different suppliersrely on 1 or 2 automakers for the purchase of supplies for their products. Thismakes the suppliers hold not so much power. Which makes them dependable uponthe success and demand from the manufacture. Competitive Rivalry in the Industry With the rise of foreign competitors in the1970’s and 80’s, rivalry in the automotive industry has become much moreintense as Firms compete on both prices and non-price dimensions. Serious competitionbegan to emerge in the 1990’s with a flood of new vehicles, designs andconcepts (Adam, Brock 2005.) Withthe market constantly changing means that competition is always among the rise.The emergent rise of the foreign market requires the rivalry to increase.
Japanesecompetitors have leadership advantages due to the amount of technology they have.This cost advantage is supreme to manufactory staying completive in this market.All of these factors create a very high amount of rivalry in the industry.Threat of New Entrants With the American Automobile marketthere is a low threat of new entrants. This is due to the high barriers ofentry into the market. Also because the high amount to buy into the market ofthis industry makes the threat of new entrants low as well. Lastly, the capabilities of safety, reliabilityand durability are so noticeable it wouldmake it hard for a new entrant to compete.
All of these factors make the threatof new entrant very low. Threat of Substitutes The threat of substitutes does exist.There are several factors to make this true.
Increasing fuel prices are causingcustomers to consider public transportation. If this trend increase, then therewill increase in the public transportation market instead of personal automobiles. There is no realistic substitute justyet but it the future this may become a problem to take in consideration. Withthe increase of Uber, Lyft, and other forms of transportation it might threatenthe market for personal automobile use by customers. As for now the threat of substitutesif moderate. Conclusion In closing, I believe that analysis has been proven to be successful.As an outcome to shows that there are several things that can hinder the marketas well help it succeed. It is all about how those things are implemented inthe American Automobile industry.
Overall I believe the market is in a goodplace and there is room for improvement. ReferencesReferencesAUTO INDUSTRY ANALYSIS. (2018). Php.scripts.psu.
edu.Retrieved 1 January 2018, fromhttp://php.scripts.psu.edu/users/l/a/law5039/assign5.htmlAUTO INDUSTRY ANALYSIS. (2018).
edu.Retrieved 1 January 2018, fromhttp://php.scripts.psu.edu/users/l/a/law5039/assign5.
htmlThe US Auto Industry in 2013: Five Forces toConsider. (2018). Ai-online.com.Retrieved 1 January 2018, fromhttp://www.ai-online.com/Adv/Previous/show_issue.php?id=5129#sthash.Y4llhSQE.dpbs