Porter's Five Forces - Automobile Industry

Porter's Five Forces - Automobile Industry

Five Forces Analysis was developed by Michael Porter to better identify competitive opportunities and attractiveness within an industry or market. Other than a SWOT analysis, this is another analysis tool to identify opportunities and risks before entering an industry. Porter’s model supports analysis of driving forces in an industry. The management can make better decision by using the information that evaluated from detailed Five Forces Analysis.

The five forces that Michael Porter has identified are widely used to assess the structure of any industry. They are:

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of Substitutes

Competitive Rivalry between Existing Players

Automobile is one of the most convenient transportation tools in our modern society today. Globalization enables foreign auto dealers to enter American market easily and also creates competition. In America, there are three major automobile manufacturers. They are General Motors, Ford, and Daimler Chrysler. However, the biggest competitions are the foreign auto manufacturers, Toyota and Honda.

Threat of New Entrants: MEDIUM

It is not that easy for an entrant to enter into a car industry because of the brand loyalty of customers. However, some of the well known foreign companies entered into US car industry easily, for instance, when Honda Motor, Co. opened its first office in Ohio, the major competitions began. The expansion of the foreign entrants decreases the market of American companies.

Bargaining Power of Suppliers: LOW

Suppliers have a little power in an automobile industry. That’s