Automotive Industry Analysis (Coursework Sample)

Automotive Industry Analysis
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Question: The world automotive industry has experienced low profitability during the past two decades. What features of the industry have caused intense competition and low profitability?
Introduction
The five forces industry analysis by Porter goes beyond companies' direct competitors. It looks at various features of the competitive structure of an industry and the economic environment, which encompasses the buyer's power to bargain, supplier(s) power, new entrant's threat, and substitute products threat. In the following essay, we use Porter's five forces model in analyzing and examining the automotive industries' competitive structure by looking at the five competitive forces influencing and shaping profit potentiality.
Figure SEQ Figure \* ARABIC 1: Porters Five Forces Model
Competitive Rivalry
Whenever a rivalry gets fierce, competitors try to seal their market and profit shares from their rivals and reduce profit potentiality for all the firms. Porter's concentration on rivalry in the automotive industry interferes with the competitive environment, influencing the surviving firm's ability to profit. For instance, high rivalry concentration means that the competitors destructively target one another's market and, at the same time, aggressively pricing products (Porter, 2014). The high frequency of competitive conflict is likely to increase competition within the automotive industry, hence decreasing profit potential. In comparison, the locomotive business is anticipated to be less competitive by the low intensity of competition; this will increase the profit possibility of the already existing automotive firm.
Supplier Power
The supplier's bargaining power in an industry is likely to interfere with the customer's competitive environment affecting the consumer's capability to attain a profit. Nevertheless, reliable suppliers are in a position to pressurize buyers through either raising the prices, lowering product qualities, or even raising the rates (all of which represent consumer cost). Additionally, stable sellers might make commerce more competitive by decreasing the customer's profit potentiality. Alternatively, weak sellers (those at the buyer's sympathy in terms of product quality and prices) might reduce the rate of competition in an industry, cumulating the buyer's profit potentiality.
New Entrants Threat
The likelihood of new competitors, as created by Porter, shakes the competitive business environment for the already existing participants hence affecting the capability of the already existing companies in achieving profitability. For instance, a high entry threat means that new entrants are probable to get fascinated by the returns made by successful companies, finding it easy to join the automotive industry. New competitors participating in the market might also drop or threaten the profitability and market share of the present competitors resulting in changes in the quality of products or price levels (Porter, 2014). Concisely, low entry threats create a less competitive business, increasing the profit potentiality for current firms. In contrast, the high risk of new entrants makes the sector more competitive, decreasing profit potential for the existing competitors.
Substitute Threats
Substitute threat shakes a firm's competitive environment influencing the firm's availability to achieve profitability. Additionally, a substitute threat might affect an industry's profitability since consumers might decide between buying the substitute instead of a firm's product (Porter, 2014). Substitutes can be a threat to the automotive industry as the low threat of substitute products is likely to make the sector attractive, increasing the firm's profit potential within the automotive industry. On the contrary, a high risk of substitute products might also make the sector less attractive hence decreasing the firm's potential for gaining profits.
Buyer Bargaining Power
Consumers' bargaining power in the automotive industry shakes the seller's competitive environment while influencing the capability of a seller to achieve profit. Influential consumers can impose pressure on sellers to lower their prices, offer better services, and improve quality products (all representing the seller's cost). Conversely, an active buyer is likely to create a competitive environment within the industry hence decreasing the seller's profit potential; a weak buyer (one at the pity of the trader's price and quality terms) is likely to reduce the competition in the automotive industry hence increasing the seller's profit potentiality.
Question Two: What will be the critical success factors in the world automotive during the next five years? Which companies will be the most profitable?
Introduction
Globally stated as one of the most significant automotive, commercial sectors, the automotive industry has employed millions coming up with merchandise that affects how people use money. Although there are numerous ways through which an automotive industry can attain success, companies within the industry should have some of the key critical success factors to guarantee long-term cost-effectiveness.
Strong Supply Chain
Having a genuine and robust supply chain will be a crucial success factor in the automobile in the next five years. This will help the carmakers have timely access to the parts significant to achieving production targets. Further, there will also be a collaboration between the supplier and manufacturer on product enhancements, which maintains the companies' compatibility. It is evident that a r