Porter's Five Force Model Essay
Currently, I am a corporate continuous improvement manager in the auto industry. Porters five force model is utilized in the auto industry to evaluate how the competitive forces are affecting the current market place. Michael Porter, a respected figure relating to industry analysis, created a way to analyze and estimate the profitability of organizations within an industry (Parnell, 2014). The analysis includes five principles which are classified as competitive forces. Existing rivalry, barriers to entry, threat of substitutes, the bargaining power of buyers and suppliers are the competitive forces in Porters five force model.
Existing Rivalry:
There is a large amount of competing firms that exist in the auto industry but a select few maintain …show more content…
The start-up cost is extremely high. Initial costs would include capital equipment, land, marketing, and a facility. Government laws have also evolved into more harsh restrictions regarding emissions and safety regulations. (CITE emission and safety changes). Also, customers base heavy emphasis on brand when purchasing a vehicle. A new firm would have to establish a reputable brand prior to posing a threat to other competitors. Finally, patented technologies may cause a new firm higher production costs due to inefficient operations.
Threat of Substitutes:
The customer’s preference plays a major role regarding the threat of substitutes. Determining trends in what customers deem important will help identify threats. Important factors began to shift with the decline of the economy. Gas prices went up, and people were more conservative with spending habits. The shift in customer’s perspective changed buying habits relating to vehicles. The demand for Fuel efficient cars increased while gas guzzling trucks decreased. Some people opted to take trains, buses, or even carpool more frequently. History has displayed that a threat of substitutes does exist.
Bargaining Power of a
Existing Rivalry:
There is a large amount of competing firms that exist in the auto industry but a select few maintain …show more content…
The start-up cost is extremely high. Initial costs would include capital equipment, land, marketing, and a facility. Government laws have also evolved into more harsh restrictions regarding emissions and safety regulations. (CITE emission and safety changes). Also, customers base heavy emphasis on brand when purchasing a vehicle. A new firm would have to establish a reputable brand prior to posing a threat to other competitors. Finally, patented technologies may cause a new firm higher production costs due to inefficient operations.
Threat of Substitutes:
The customer’s preference plays a major role regarding the threat of substitutes. Determining trends in what customers deem important will help identify threats. Important factors began to shift with the decline of the economy. Gas prices went up, and people were more conservative with spending habits. The shift in customer’s perspective changed buying habits relating to vehicles. The demand for Fuel efficient cars increased while gas guzzling trucks decreased. Some people opted to take trains, buses, or even carpool more frequently. History has displayed that a threat of substitutes does exist.
Bargaining Power of a