United States Automotive Industry and Porter's Five Forces Model
American Automotive Industry
United States Automotive Industry and Porter's Five Forces Model
United States Automotive Industry and Porter's Five Forces Model
The purpose of this report is to analyze and discuss the automotive industry of the United States in the light of Five Forces of Competition presented by Michael Porter. The report starts with an in-depth introduction to the U.S. automotive industry; including its profile, present structure, major participants, evolution, and future outlook. The main body of the report discusses the competition present in the U.S. automobile industry from five different perspectives. The manufacturers in the U.S. automobile industry face a dual competition from the local and international competitors and from the substitute transportation mediums. The entry of new competitors in the industry is also a big threat for these manufacturers.
In the U.S. automobile industry, the customers make their purchase decisions according to certain preferences; including price, quality, performance, brand, and design of the automobiles (Morton, Silva-Risso, & Zettelmeyer, 2011). These preferences define the strength of their bargaining power in the industry. The suppliers, on the other hand, have to keep their prices at lower levels in order to compete with the local and international suppliers. The analysis of these five forces gives a true snapshot of the U.S. automotive industry to the investors and key stakeholders (Porter, 1998).
Introduction to the Auto Industry
a) Industry Definition:
Automobile industry consists of companies that design, manufacture, promote, and sell motor vehicles. The major products of automobile industry include cars, light commercial vehicles, and heavy commercial vehicles. It is among the world's largest industries by revenues and size of the markets. Due to a large number of manufacturers, high level of competition and an intractable race towards competitiveness, this industry has never seen a monopolistic influence by a single manufacturer (Morton, Silva-Risso, & Zettelmeyer, 2011). China, United States, Japan, Germany, South Korea, and India are the largest automobile manufacturing countries while Toyota, General Motors, Volkswagen, Hyundai, Ford, Nissan, Honda, Daimler AG, and Suzuki are the market leaders of the industry. These manufacturers have dominated the entire world market with their mechanically advanced and ingeniously designed motor vehicles. Automobile industry is highly labor and capital intensive which essentially require its participants to invest huge amounts and human capital to operate and grow in a profitable fashion.
b) Industry Profile:
The automobile industry of the United States evolved at the end of 19th Century and became the world's second largest industry after China in a few decades. The industry has experienced many changes during this period; began production with internal combustion engines and battery-powered electric engines and followed by steam engines and electric power engines, the U.S. automobile industry has always brought revolutionary changes in the automobile manufacturing sector of the World. The first gasoline-powered car, Buckeye Gasoline Buggy manufactured by John William Lambert in 1891 was the evolution of automobile manufacturing in the United States. It was followed by a series of automobile manufacturing by Elwood Haynes, Alexander Winton, Ransom E. Olds, and Oldsmobile Curved Dash. Keeping in view the rapidly growing automobile industry in the country, the Federal Aid Road Act of 1916 allocated a huge amount for building roads and improving transportation infrastructure (Bigelow & Argyres, 2008).
c) Industry Structure:
At present, the U.S. automobile industry is recognized by its massive production and size of the domestic market. There are hundreds of manufacturers in the country that are producing highly modernized automobiles and meeting the demands of the domestic and international customers. The big three U.S. automobile manufacturers are General Motors, Chrysler, and Ford. These three manufacturers are sharing the major automobile production in the United States with some renowned multinational brands including Honda, Toyota, Nissan, BMW, Mazda, Mitsubishi, Hyundai-Kia, Subaru, and Daimler (Vlasic, 2011). In addition to the motor vehicle manufacturers, the U.S. automobile industry consists of a large number of auto parts suppliers that supply these parts to the local manufacturers and consumers as well as make heavy exports to all the corners of the world.
d) Future Outlook:
Keeping in view the rapid technological and mechanical advancements in the automobile manufacturing processes, it can be projected that the U.S. auto industry will always show a growing trend in the future. The market leaders will keep on introducing astonishing features in the new models of their cars in order to compete with their...
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