what industry forces within the automotive industry are most important to consider

The Us auto industry is one of the nigh important industries and economic sectors in the Usa. It contributes 3-3.5% to the overall US GDP (CAR, April 2010), and is likewise one of America's largest exporter's (Edgeless, 2012). Production numbers for 2011 of 8.5 meg vehicles are merely outweighed past Mainland china, and are currently roughly in line with Nihon (OICA, 2011). The industry employs over ane.7 million people directly, and 4.5% of the population indirectly (Automobile, April 2010). Cathay overtook the US as the world's elevation auto producer in 2010, and this condition is expected to continue.

Industry Profile
The "large three" United states Domestic market leaders remain General Motors, Ford and Chrysler. Foreign competitors include Toyota, Honda, Hyundai and Nissan. As of October 2012, US market share is divided into 15.6% Toyota, 15.3% Full general Motors, 12.0% Ford, 11.4% Hyundai-Kia, 8.5% Honda. In full, this makes upward, 62.8% of the market with a classification of a medium concentration level, and very high revenue volatility (IBIS World, Oct 2012). Comparing a previous quarter'due south market share (January-May, 2012), GM led with 17.8% followed by Ford xv.vi%, Toyota fourteen.5%, Chrysler-Fiat, eleven.5, Honda, 9.6% and Nissan eight.1% (Zacks, June 2012). The variance shows the degree of competition in the marketplace.
Because of the current state in the global economy, college oil prices and move towards dark-green technologies, the automotive industry is in a state of transition. Hybrid vehicles, fuel efficiency and technologi¬cal innovation are paramount. Larger trends include moves to smaller, more fuel efficient vehicles and moves towards more robust techno¬logical frameworks on production and product levels. The global in¬dustry is highly capital letter and labor intensive with the US domestic indus-try insufficiently hampered by significant historical legacy costs (i.eastward. UAW). Labor, materials and advertising are all significant costs (Indus¬try Handbook, 2012). Sales occur through private and high-volume fleet sales, with the seasonal highs in April-June, and lows Nov- January (Industry Handbook, 2012). Revenue comes from sales, every bit well equally financing, leases and extended warranties.

Industry Market place Structure
The oligopolistic market is dominated past a small number of manu¬facturers (10 or less) whose actions directly influence one another's profits. The U.S. Bureau of Census of 2007 reports that four firms dom¬inate 68% of the motor vehicle market and viii firms dominate 86% of the marketplace (Samuelson). The fates of oligopoly automotive industry firms are mutually interdependent (Samuelson), and this may exist best retrospectively witnessed in the recent financial crisis of 2009 where all of the big 3 United states of america automotive manufacturers went into dire economic straits, and faced similar challenges. While there is class uniformity in that all of the major auto manufacturers produce vehicles for transport; in that location is also wide variation in product features, prices and range of op¬tions. Considering of this, advertising and marketing to diverse market place segments also becomes extremely important.
The manufacture is partially protected past the high barriers of entry in in¬troducing new products, which include production facilities, vehicle de¬velopment costs, advertising and marketing infrastructure (Samuelson).

Time to come Outlook
In a 2012 United states Automotive survey, "A Return to Optimism" manage¬ment consultants Booz & Company bespeak out that the future outlook for the US auto industry is practiced. The International Organization of Motor Vehicle Manufacturers 2011 auto sales figures prove an 11.five% increase over 2010 figures. Whether this tendency continues remains to be seen. Since the 2009 financial crisis, major automotive manufac¬turers and suppliers have cleaned their balance sheets, removed ex¬cess capacity and restructured costs (Booz). Of the big three, nigh analysts are more bullish on Ford's future with categories of hybrid, gas alternative and fuel efficient models leading the pack. The big three too agree that that they need to abound "intelligently" to avert futurity fiscal calamities with a sense of "black swan" preparedness and caution. Robust possibilities of wireless networks and "digitiza¬tion" present opportunities for farther technologies to exist embedded within vehicle systems, including condom, navigational connectivity and entertainment in order to meet consumer needs.

Porter'due south Five Forces and the Car Industry
Porter'due south 5 major forces shaping all industries and structures are: the bargaining power of buyers, the bargaining power of suppliers, competitive rivalry in the industry, threats of new entrants and threats of substitutes (Porter, 1979).
Bargaining Ability of Automotive Buyers
In recent years, this seems to take weighed heavily towards buyers – with industry players needing to be more than vigilant regarding consumer preferences. Because of the current global economic conditions, at that place is a smaller number of buyers at both Us and global levels. This is most axiomatic in Europe currently with Ford having to shut plants, cutting 6,200 employees, or xiii% of the European workforce to stem losses exceeding US$1.v billion (Barr, October 25, 2012). Consumers are also keeping their automobiles for longer, and being more prudent and judicious when ownership new. Strategically, the opportunity is for the industry to focus on fuel efficiency and cost sensitive strategies more fully to shift from profit and product models previously centered on trucks and SUV's.
Bargaining Power of Automotive Suppliers
The Industry Analysis Handbook 2012 describes the automobile supply business as fragmented. Many suppliers rely on one or ii automakers for the purchase of the majority of their products. Because of this, suppliers hold fiddling ability and are susceptible to demand and requirement of automobile manufacturers. The exception within this is the world price of steel.
Competitive Rivalry
A longer term chart from the Ann Arbor Center for Automotive Research is quite telling:

The chart shows in stark detail the marketplace share of Usa motor vehicle pct sales from 1986-2011 of the Detroit Big Three versus the international competitors. Looking from a x-year perspective, the trend has shifted from the big three enjoying a 60% domestic marketplace share to the opposite, with international competitors now holding the lx% share. If the trend continues for another 10 years, the marketplace share would shift to 73% international, and 25% domestic. The future strategy seems articulate – take a new look at what the Japanese and other ascendant marketplace players are doing and copy and better upon them. The lesson also evident from the tendency and the chart is that the domestic manufacturers are clearly not vigilant enough regarding this threat. The maximizing of plant efficiency with regards to costs is important in order to maximize chapters utilization. Moves to 24 hour shifts and more active manufacturing processes such every bit Toyota'south lean production plants methods are needed to be able to switch model production to meet changing market demands.
Threat of New International Entrants
While information technology is true that the barriers to entry for auto manufacturing industry in the Usa are loftier, the increasingly global nature of the economy and relatively recent emergence of foreign competitors with the capital, technology, direction and marketing skill represent a real threat to the domestic manufacture. This becomes axiomatic in looking at the larger global marketplace in terms of vehicle sales. According to the International organisation of Motor Vehicle Manufacturers, the following OEMs sell more a million vehicles a year:
Earth Motor Vehicle Product, 2010
1 TOYOTA 8,557,351
2 1000.M. 8,476,192
3 VOLKSWAGEN 7,341,065
4 HYUNDAI 5,764,918
5 FORD four,988,031
6 NISSAN 3,982,162
seven HONDA iii,643,057
8 PSA 3,605,524
9 SUZUKI two,892,945
10 RENAULT 2,716,286
11 FIAT 2,410,021
12 DAIMLER AG 1,940,465
13 CHRYSLER 1,578,488
fourteen B.One thousand.W. one,481,253
15 MAZDA 1,307,540
xvi MITSUBISHI ane,174,383
17 CHANA Auto, i,102,683
18 TATA 1,011,343
(OICA, 2010)
Strategically, domestic competitors need to identify farther global opportunities and look at competitors and their strategies for market place incursion and archway. An example of the threat is Korean automaker Kia, which has entered the American market through low-cost, high quality cars with enough reliability to offer a 100,000 mile 10-year warranty (Kotler and Keller, p.128, 2012). New entrants such every bit Kia can now more than easily leverage existing capabilities and cash flow to further shake upwardly marketplace share rankings.
Another characteristic of Porter'south five forces is low returns because of the costs of competition. It would be wise for domestic manufacturers to keep versed in foreign lower cost strategies. Low-cost and high quality producers such as Kia and Tata have the potential of taking more market share from domestic producers, specially from the growing low end of the market. Information technology is also useful to note that the existing loyalty to major brands has eroded. Another strategic recommendation here would exist for domestic manufacturers to more sophisticatedly leverage client switching costs through social networks and machine owners' club brand loyalty.
Threat of Substitutes
The 20th century tin be seen equally one dominated by the rise of the automobile, and auto manufacturing. This is expected to change in the 21st. One of the factors influencing the change is the price and availability of oil and gasoline, which impacts consumers' willingness to purchase a new or second vehicle. These higher costs will likely pb a smaller market segment of consumers unless higher levels of fuel efficiency combined with lower ownership toll are accomplished.
More subtle structural threats include the larger shift towards a knowledge economy from an industrial base with its urban, commuter civilisation. A shift towards a knowledge economy and rise of online modalities reduce the need for a two or more vehicle household. The Center for Automotive research estimates that currently the number of cars at 2.1/ household has reached its summit, and will either level out or driblet to 2.07/household or less by 2025 (CAR, 3). The Center notes that while the motor vehicle will remain the dominant transportation mode for most US households for the new millennia's first 25 years, market place opportunities volition shift from domestic needs to emerging economies going through industrialization and creation of a middle form (i.e. China, India, and Brazil). Domestic The states opportunities lie in the supply of alternative/hybrid transport options and segmenting into these markets with depression toll vehicles.

Determination
More than anything, Porter'southward V Forces model opens a necessary dialogue for the Big Three, and increasingly ascendant foreign competitors. Strategies must exist devised both domestically and globally to face and address new economic players. Porter's model also provides a moving picture of the industry inside larger economic frameworks, especially with regards to the global economic system and necessary changes that must occur in manufacturing. Consumers volition keep this a viable and dynamic market place, and it is important domestic manufacturers aren't left behind. Porter's model also allows strategic avenues and so the The states auto industry tin again thrive both in recession and economic boom times. Understanding forces that shape competition provides a focal constellation to meliorate see strategies for profitability. This volition put the US industry on a smart trajectory towards success.

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Source: https://www.ai-online.com/2012/11/the-us-auto-industry-in-2013-five-forces-to-consider/#:~:text=Porter's%20five%20major%20forces%20shaping,substitutes%20(Porter%2C%201979).

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