Question

In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.

I know what the Five Forces are: Apply Porter's Five Forces Strategy Analysis as it applies to the American automotive industry, with a focus on the U.S. market.

4.1. Bargaining Power of Buyers

4.2. Bargaining Power of Suppliers

4.3. Competitive Rivalry in the Industry

4.4. Threat of New Entrants

4.5. Threat of Substitutes

Answer 1

Porter's five forces analysis is a very useful methodology to analyse the external environment effect on any organisation or industry. By applying the external five forces we can easily determine the after effects of those forces on the specific organisation.

Five forces of porter's analysis are as follows.

Competition rivalry
Supplier Bargaining
Customer bargaining
Threat of new entrants
Substitute threats

Five forces analysis on the Automobile industry

Automobile industry is a very big market and has been producing huge revenues as well as facing the huge competition in each and every aspect. As the new competence are entering the markets they are increasing the overall competition and affecting the structure.

Competition rivalry

Because there are so many operators available in the same region with the same catagories and the low cost manufacturers entered the market, Its hard to find the most profitable way to surpass the safety regulations of the industry. This specific Innovation and ideation is driving extreme changes in the Automobile industry. Automobile industry is mainly fuelled by the innovation and they decide what should Automobile industry do. Low cost Automobiles are having their full authority over the domestic transportation but in international trade premium manufacturers are driving the industry. By having extreme diversity in the field we can say it is one of the most competitive businesses in the country.

Supplier bargaining

As the Companies are increasing number of Automobile manufacturers the Automobile suppliers are also increasing. Everything from labour to the fuel has a supplier and the suppliers usually bargain with the companies for getting a better price and a better profit. Geo political factors also influenced the condition of supplying and labour is also fuelled by the power of unions who usually bargain for the costly concessions from the Automobiles.

Customer bargaining

As the online booking has introduced, customer has power to compare multiple models from different Automobiles which gives in the authority to choose between the lowest available price.This is specific revolution in the Information Technology has bring a bigger problem for the Automobile Industries to be more competitive. This specific power of the customer is driving the industr, hence Automobiles are helpless to reduce their affairs and work accordingly to the customer.

Threat of new entrants

Automobile industry is going very fast and multiple new companies are putting off their Automobiles in the industry every day. By having different competitors in the same field the number of increased competition also produces a threat for the existing Automobile companies as well as the new companies who is entering the industry. New entrants also increase the competition by reducing their affairs and implementing new strategies to attract the customer.

Threat of substitution

America has a verified competition in the specific industry which could lead to Intense substitution. Availability of factors including substitution regarding various new entrants as well as increasing demand of electric vehicles can vary widely affect the overall availability of options for the customers affecting the threat of substitution for this is specific industry.