A.           Threats of New Entrants

            Threats of new entrants are moderate because entry to the automotive industry is unlikely to be successful on a small scale because huge amount of capital is needed in order to set-up large-scale production plants. Aside from that, factors including difficulty in accessing distribution channels are a problem because dealers and distributors tend to stock well-established branded automobiles as an answer to the demand of the consumers. Aside from that, top players in the market, including the 5 stated in this paper hold licenses to use numerous patents, copyrights and trademarks which focus on engineering and technical expertise to maintain their competitive advantage through innovations. In addition, there are different governmental standards and regulations that are connected to safety, fuel economy, emissions control, noise control, vehicle recycling, substance of concern, engines and equipment manufactured for sale in the world. Above all, manufacturing and other assembly facilities are subject to different stringent standards which regulate air emissions, water discharges and waste management (Datamonitor, 2008).


B.           Bargaining Power of Buyers

            Buyers in the automotive industry are commonly large companies with a vital financial power. Therefore, they can be authorized dealer for a number of manufactures and they can make large purchases and put pressure on market players in order to reduce prices. However, the brand strength or the image of the brands weaken the buyer power, because the leading car manufacturer have already established their relationship with the customers, thus, buyers are more likely to enter into different contracts with specific manufacturers to meet the demand of the customers, at the same time, increase sales. Aside from that, there are number of market players that have integrated forward into retailing, which put pressures on buyers (Datamonitor, 2008).


C.           Bargaining Power of Suppliers

            Inputs to the global automobiles market include a variety of raw materials, assembled and semi-assembled components, energy, freight and transportation. On the other hand, suppliers have a strong power over the industry because the suppliers, which are commonly large companies, are not dependent on the automotive industry but operate in a diverse market. In addition, the power of supplier is being strengthened because the automotive industry requires raw materials of high quality. However, this is complemented because motor car manufacturers does not focus on one suppliers, thus reliance to suppliers keep to minimum by using wide range of companies as their suppliers  (Datamonitor, 2008).


D.           Threats of Substitutes

            The presence of used car market is a threatening player in the new cars market. As a matter of fact, the volume of used car sold had exceeded that of the new cars market. However, this lessens because most of car manufacturers are focusing on producing affordable new cars. On the other hand, with connection with the awareness of environmental issues, people tend to substitute automobiles for more environmentally friendly forms of transport such as walking, cycling and even public transportation. However, the said substitute is unlikely to happen on a large scale or to become a complete substitute for automobile, thus it does not have that much impact on the industry (Datamonitor, 2008).


            Furthermore, hybrid is growing in terms of sales, however market players play a vital role in the said green market (Datamonitor, 2008), therefore, making the threat of substitute low.


E.           Rivalry among Existing Firms

            It is important to consider that the global automobiles industry is highly concentrated with the top three players in the industry, which holds 40% of the entire market value. Competition is increasing and intensifying because different developed and newly developed countries such as Japan and Korea are starting to compete in the global market. Aside from that, most of car manufacturers are now ramping in terms of production which put pressures on their rivals. Besides, the industry is becoming consolidated because increase in raw material cost resulted to increase in production costs and put pressure on the players in the market (Datamonitor, 2008). Therefore the rivalry in the industry is strong.


 


VI.          Conclusion

After analyzing the information gathered, it had been found out that the industry is facing problems because of the current financial crisis. Customers tend to save money and stop buying cars for the future. As a result, the sale of automobile is forecasted to decline. On the other hand, because of the said financial crisis, people tend to go for second-hand cars, cycling, walking and transportation. However, the said factors do not have a long-lasting and strong impact because of the current effort of major players in the industry including introduction of affordable and reliable cars in the market. Furthermore, most of companies are also focusing on green market, which enables them to manufacture and sell hybrid cars, as an answer to the concerns of the customer towards the different environment issues.


 


VII.         References

2007 Production Statistics. (2007). Retrieved May 4, 2009, from Organization International des Constructeurs d’Automobiles: http://www.oica.net/category/production-statistics/


Automotive Industry – Industry Overview. (n.d.). Retrieved May 4, 2009, from Automotive Components & Parts: http://www.automotive-online.com/auto-industry.html


Collins, S. (2006, April 20). International Trade Commission (ITC) Public Hearing on the Economic Effects of a US – Korea FTA on the US Automotive Industry. Retrieved May 4, 2009, from Automotive Trade Policy Council: http://www.keia.org/images/04.AutomotiveTradePolicyCouncilRemarks.pdf


Datamonitor. (2008). Global Automobiles. Retrieved May 4, 2009, from Datamonitor: http://www.datamonitor.com/


Evans, F., & Bishop, D. (2001). Valuation for M & A: Building Value in Private Companies. John Wiley and Sons.


Györffi, M. (2006). Common Policies. Retrieved May 4, 2009, from European Parliament: http://www.europarl.europa.eu/parliament/expert/displayFtu.do?id=74&ftuId=FTU_4.8.4.html&language=en


Haberberg, A., & Rieple, A. (2008). Strategic Management: Theory and Application. Oxford University Press.


Hsu, J. (2002, July 1). Globalization Withint the Auto Industry: A Major Benefit of Globalization for GM has been Access… Retrieved May 5, 2009, from AllBusiness: http://www.allbusiness.com/management/benchmarking-key-business-process-benchmarking/219142-1.html


IHS. (2006, October 31). Frost: Intellectual Property Rights Protection to Reduce Counterfeiting Risk in Chinese Auto Industry. Retrieved May 9, 2009, from IHS: http://auto.ihs.com/news/2006/frost-counterfeit-china-auto.htm


Johnson, D., Sun, J., & Johnson, M. (2007). Integrating Multiple Manufacturing Initiatives: Challenges for Automotive Suppliers. Measuring Business Excellence , 11(3), 41 – 56.


KMPG. (2008, November 27). Automotive: A Rough Road: The Effects of Today’s Financial Crisis in the Global Automotive Industry. Retrieved May 4, 2009, from KMPG International: http://www.kpmg.com/SiteCollectionDocuments/A-rough-road-financial-crisis.pdf


Lepeak, S. (2008, January 1). “What’s happening in outsourcing trends? Manufacturing, automotive, and high-tech industries are looking mostly at information technology and business process outsourcing.”. Retrieved May 4, 2009, from Implement & Tractor. Scissortail Productions LLC. HighBeam: http://www.highbeam.com/doc/1G1-175526082.html


OICA. (2006, November 29). The World’s Automotive Industry. Retrieved May 5, 2009, from The International Organization of Motor Vehicles Manufacturers: http://www.oica.net/wp-content/uploads/2007/06/oica-depliant-final.pdf


Partridge, L., & Sinclair-Hunt, M. (1997). Strategic Management. Select Knowledge Limited.


Raver, E. (2006, February 16). The Effect of NAFTA on the US Auto Industry. Retrieved May 2, 2009, from Associated Content: http://www.associatedcontent.com/


Singleton, K. (2004, March 14). Hybrid Cars Are Gaining Popularity. Retrieved May 5, 2009, from World Internet News: http://soc.hfac.uh.edu/artman/publish/article_105.shtml


UNCTAD. (2009, January 19). Assessing the Impact of the Current Financial and Economic Crisis on Global FDI Flows. Retrieved May 5, 2009, from United Nations Conference on Trade and Development: http://www.unctad.org/templates/Download.asp?docid=10973〈=1&intItemID=2068


Wilson, R., & Gilligan, C. (2005). Strategic Marketing Management: Planning, Implementation and Control. Butterworth-Heinemann.


Yagi, T. (2002). Recent Trends in the Robotization of the Japanese Automotive Industry. Industrial Robot: An International Journal , 29(6), 485 – 499.


Zhang, J. (n.d.). Outsourcing to China Part 1. Retrieved May 4, 2009, from SourcingMag.com: http://www.sourcingmag.com/content/c050802a.asp


 


 


VIII.       Appendices Appendix A: Automotive Industry and the Economy of the World

 


(2004 or latest available figures)


(In Million)


Turnover


Investments


Public Revenue


Argentina


3,519*


 


 


Australia


18,929


 


887


Austria


13,900


580


8,315


Belgium


18,225


302


7,155


Brazil


26,997


1,141


 


Canada


77,469*


2,496**


9,701


China


86,984


5,330


 


Croatia


205


20


1


Czech Rep.


12,091


663


1,032


Denmark


1,165


46


5,867


Egypt


2,901


1,661


1,911


Finland


1,076


36


3,807


France


111,901


4,196


34,000


Germany


227,666


11,900


44,314


Greece


162


17


3,200


Hungary


8,144


432


 


India


16,893


1,014


11,122


Indonesia


3,858


1,071


 


Italy


54,135


3,450


40,954


Japan


435,610


6,450


66,444


Korea


62,993


2,239


16,615


Malaysia


6,084


1,263


 


Mexico


3,348


 


 


Netherlands


7,876


81


10,837


Poland


16,202


893


 


Portugal


4,457


176


6,897


Romania


1,836


308


 


Russia


7,019


223


654


Slovakia


8,711


1,056


 


Slovenia


1,544


40


 


South Africa


20,602


277


3,459


Spain


75,104


277


3,459


Sweden


24,784


861


5,590


Switzerland


4,252


 


4,689


Thailand


116,58*


443


2,871


Turkey


28,196


502


10,127


UK


58,238


1,590


46,099


USA


425,106


30,416


64,289


Total


1,889,840


84,801


433,160


* gross productive value ** gross fixed capital formation


 


Source:  (OICA, 2006)


Appendix B: 2007 Car Production Statistics

 


Country


Cars


Commercial Vehicles


Total


% Change


Argentina


350,735


193,912


544,647


26.0%


Australia


283,348


51,269


334,617


0.9%


Austria


199,969


28,097


228,066


-17%


Belgium


789,674


44,729


834,403


-9.1%


Belgium


789,674


44,729


834,403


-9.1%


Brazil


2,388,402


582,416


2,970,818


13.8%


Canada


1,342,133


1,236,105


2,578,238


0.3%


China


6,381,116


2,501,340


8,882,456


22.0%


Czech Rep.


925,778


12,749


938,527


9.8%


Egypt


67,149


36,403


103,552


13.1%


Finland


24,000


303


24,303


-25.8%


France


2,550,869


464,985


3,015,854


-4.8%


Germany


5,709,139


504,321


6,213,460


6.8%


Hungary


287,982


4,045


292,027


53.5%


India


1,707,839


598,929


2,306,768


14.4%


Indonesia


309,208


103,580


412,788


39%


Iran


882,000


115,240


997,240


10.3%


Italy


910,860


373,452


1,284,312


6.0%


Japan


9,944,637


1,651,690


11,596,327


1.0%


Malaysia


347,971


93,690


441,661


-12.2%


Mexico


1,209,097


886,148


2,095,245


2.4%


Netherlands


61,912


76,656


138,568


-13.1%


Poland


695,000


89,700


784,700


9.8%


Portugal


134,047


42,195


176,242


-22.5%


Romania


234,103


7,609


241,712


13.2%


Russia


1,288,652


371,468


1,660,120


10.4%


Serbia


8,236


1,667


9,903


-11.4%


Slovakia


571,071


0


571,071


93.3%


Slovenia


174,209


24,193


198,402


29.6%


South Africa


276,018


258,472


534,490


-9.1%


South Korea


3,723,482


362,826


4,086,308


6.4%


Spain


2,195,780


693,923


2,889,703


4.0%


Sweden


316,850


49,170


366,020


9.9%


Taiwan


212,685


70,354


283,039


-6.7%


Thailand


315,444


971,902


1,287,346


7.8%


Turkey


634,883


464,531


1,099,414


11.3%


Ukraine


380,061


22,530


402,591


39.7%


UK


1,534,567


215,686


1,750,253


6.1%


USA


3,924,268


6,856,461


10,780,729


-4.5%


Uzbekistan


170,000


14,900


184,900


68.1%


Others


429,430


168,466


597,896


12.5%


Total


53,049,391


20,103,305


73,152,696


5.7%


 


Source:  (2007 Production Statistics, 2007)


 


 


 


 


 


 


 


 


Appendix C: Direct Employment in Automotive Industry

           


Countries


Employment


Countries


Employment


Argentina


12,166


Korea


246,900


Australia


43,000


Malaysia


47,000


Austria


32,000


Mexico


137,000


Belgium


45,600


Netherlands


24,500


Brazil


289,082


Poland


94,000


Canada


159,000


Portugal


22,800


China


1,605,000


Romania


59,000


Croatia


4,861


Russia


755,000


Czech Rep.


101,500


Serbia


14,454


Denmark


6,300


Slovakia


57,376


Egypt


73,200


Slovenia


7,900


Finland


6,530


South Africa


112,300


France


304,000


Spain


330,000


Germany


773,217


Sweden


140,000


Greece


2,219


Switzerland


15,500


Hungary


40,800


Thailand


182,300


India


270,000


Turkey


230,736


Indonesia


64,000


UK


213,000


Italy


196,000


USA


954,210


Japan


725,000


 


 


Grand Total (39 countries only)


8,397,451


 


Appendix D: Market Share

 


Company


Share (%)


Toyota Motor Corporation


15%


Ford Motor Company


12%


General Motors Corporation


11.40%


Daimler AG


10.30%


Other


51.30%


Total


100%


 Source: (Global Automobiles, 2008)




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