Five Forces Car Industry
Dissertation on Automobile Industry
The world automobile industry had experienced near constant growth through to the mid-1980’s. The transition from horse carriages to automobiles brought about uncertainty over the development of the product during the industry’s infant years. As the automobile evolved, demand for automobiles soared at different points in time throughout the world. However, depressed demand eventuated two decades ago after the saturated markets of North America, Europe and Japan. This consequently left industry profitability at a recession. The reasons to why such an occurrence was brought about are explained below.
Porter’s Five Forces
Threat of Substitutes
The competition of substitutes has remained calm within the industry (Grant, 1998). In the absence of close substitutes for a product, consumers usually will not react to price increases and switch to substitutes (Grant, 2002). Consumers’ reasons for demand for an automobile can differ. Fundamentally, motor vehicles serve the purpose to deliver passengers from the departing location to a particular destination. Grant (2002) says, “the more complex the needs being fulfilled by the product… the lower the extent of substitution by customers on the basis of price differences”. If the intent is solely transportation needs, such a need can be simply satisfied by the substitutes of public transport. On the other hand, more complex needs, such as consumers desiring a more flexible, comfortable, and personal means of transportation, decrease consumers’ propensity to switch to substitutes.
Threat of Entry
New entrants in an industry intensify competition in their respective markets. However, they are usually disadvantaged in respect to competing at the competitive level (Grant, 2000). Established manufacturers can hold several abilities gained from survival in the industry that entrants cannot instantly acquire, and these further create barriers to entry into the industry.
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The world automobile industry had experienced near constant growth through to the mid-1980’s. The transition from horse carriages to automobiles brought about uncertainty over the development of the product during the industry’s infant years. As the automobile evolved, demand for automobiles soared at different points in time throughout the world. However, depressed demand eventuated two decades ago after the saturated markets of North America, Europe and Japan. This consequently left industry profitability at a recession. The reasons to why such an occurrence was brought about are explained below.
Porter’s Five Forces
Threat of Substitutes
The competition of substitutes has remained calm within the industry (Grant, 1998). In the absence of close substitutes for a product, consumers usually will not react to price increases and switch to substitutes (Grant, 2002). Consumers’ reasons for demand for an automobile can differ. Fundamentally, motor vehicles serve the purpose to deliver passengers from the departing location to a particular destination. Grant (2002) says, “the more complex the needs being fulfilled by the product… the lower the extent of substitution by customers on the basis of price differences”. If the intent is solely transportation needs, such a need can be simply satisfied by the substitutes of public transport. On the other hand, more complex needs, such as consumers desiring a more flexible, comfortable, and personal means of transportation, decrease consumers’ propensity to switch to substitutes.
Threat of Entry
New entrants in an industry intensify competition in their respective markets. However, they are usually disadvantaged in respect to competing at the competitive level (Grant, 2000). Established manufacturers can hold several abilities gained from survival in the industry that entrants cannot instantly acquire, and these further create barriers to entry into the industry.
We can