Auto Industry Structure and Resources
Automotive Industry – Competitive Structure and Resources
WS3A7-Team 1- MBAo221
Indiana Wesleyan University
ADM 534
An oligopoly is defined by Keat and Young (2009) as, “A market in which there is a small number of relatively large sellers.” The auto industry is considered to be to an oligopoly because there are a large number of sellers, thus leaving the consumer only a certain number of companies from which to purchase an automobile. The major manufacturers include Ford, Chrysler, General Motors (GM), Toyota, and Renault/Nissan. According to Taylor (2012), profits are going to be derived from a handful of mega-companies in North America, Europe, and Asia. These companies include General Motors (GM), Ford, Toyota, Volkswagen, Renault/Nissan, Hyundai/Kia, and Fiat/Chrysler. The chart below, taken from Taylor’s article, demonstrates global sales of auto makers in 2011 and what is predicted to be the companies’ global sales in 2020. (Taylor 2012). This chart reflects which auto makers are at the top in terms of sales, so this could also be interpreted as the companies that are the strongest within the industry.
An industry is a group of firms that market products which are close substitutes for each other. Some industries are more profitable than others due to the dynamics of competitive structure of an industry. There are basically five forces that determine the long-run profitability of an industry; threat of entry of new competition, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and degree of competition (Porter, 2008).
Many companies within the United States and world may look to the automotive industry as a possible “cash cow.” This is due to the large inelastic demand followed with a hefty pay off per sale. As a company interested in entering the automotive industry competition, one may find that it is easier said than done. Since 1860, there have been over 1,800 manufacturing companies that have
WS3A7-Team 1- MBAo221
Indiana Wesleyan University
ADM 534
An oligopoly is defined by Keat and Young (2009) as, “A market in which there is a small number of relatively large sellers.” The auto industry is considered to be to an oligopoly because there are a large number of sellers, thus leaving the consumer only a certain number of companies from which to purchase an automobile. The major manufacturers include Ford, Chrysler, General Motors (GM), Toyota, and Renault/Nissan. According to Taylor (2012), profits are going to be derived from a handful of mega-companies in North America, Europe, and Asia. These companies include General Motors (GM), Ford, Toyota, Volkswagen, Renault/Nissan, Hyundai/Kia, and Fiat/Chrysler. The chart below, taken from Taylor’s article, demonstrates global sales of auto makers in 2011 and what is predicted to be the companies’ global sales in 2020. (Taylor 2012). This chart reflects which auto makers are at the top in terms of sales, so this could also be interpreted as the companies that are the strongest within the industry.
An industry is a group of firms that market products which are close substitutes for each other. Some industries are more profitable than others due to the dynamics of competitive structure of an industry. There are basically five forces that determine the long-run profitability of an industry; threat of entry of new competition, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and degree of competition (Porter, 2008).
Many companies within the United States and world may look to the automotive industry as a possible “cash cow.” This is due to the large inelastic demand followed with a hefty pay off per sale. As a company interested in entering the automotive industry competition, one may find that it is easier said than done. Since 1860, there have been over 1,800 manufacturing companies that have
References: Blue, J. (2012). Green Living. Glass and aluminum recycling. Retrieved from http://greenliving.nationalgeographic.com/glass-aluminum-recycling-2933.html Bureau of Labor Statistics (2012) Business Dictionary.com. (2012). Market Structure. Retrieved September 20, 2012, from Business Dictionary.com: http://www.businessdictionary.com/definition/market-structure.html Georgano, Nick (Ed.) George, P. (2012). How Stuff Works. Top 5 materials used in auto manufacturing. Retrieved from http://auto.howstuffworks.com/under-the-hood/auto- manufacturing/5-materials-used-in-auto-manufacturing5.htm Hincha-Ownby, M Keat, P. & Young, P. (2009). Managerial Economics (6th ed.). New Jersey: Pearson Education, Inc Porter, M. (2008). The five competitive forces that shape an industry. Retrieved from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-an-industry. Taylor,A. (2012). The race to become the world 's uber-automaker. Retrieved from http://money.cnn.com/2012/04/12/autos/global_auto_dominance.fortune/index.htm