INDUSTRIAL ANALYSIS: AUTOMOBILE INDUSTRY –Praneeth Konduri INTRODUCTION: Automobile industry in the North America is a very established and was the world’s biggest automobile industry for many years, during the 20th century, which was started with a number of companies in the early 1900’s. But, as the time passed, many companies opted out the competition and some companies merged, and finally only three companies, namely Ford, General Motors, Chrysler stayed in the competition, taking advantage over other independent makers, because of their financial stability. The industry took different shapes and went through different phases-, the depression of the 30’s, the stricter government regulations for automobile manufacturing in the 1960’s …show more content…
Bargaining Power of Buyers: The buyers in the automobile industry are the end- customers, who are the citizens and residents of the North America. There are also the distributors in between, but the buying power of the distributors varies with location. The buying power of the people of the country again depends on various factors, such as economy of the country, employment rate, percapita income of the nation, and the rise in the fuel prices to consider a few. The 2008 recession/crisis has seen a very big down fall of the sales of the automobiles in the North America. A stable economy is very much important aspect to be considered in this part of the analysis. But, again the sales hit an all-time high by this year (2014). It is projected that by the end of 2018, the North American automobile industry gains back its majority share in the world. But, if a crisis occurs, the fall in the sales numbers is very huge, and so, it is uncertain and so the risk of the bargaining power of buyers could be placed in the range of high to …show more content…
Threat of Substitutes: As there are a limited number of established companies in the market, the buyer has very little choice to go for other alternatives. If the buyer decides to buy a car, he could choose from the models available to him, from those few companies. All the automobile companies follow all the safety regulations set by the federal government, and the companies offer wide range of products to meet the consumer needs. But, there is another threat in the form of substitutes- Used vehicles. They are available for a very cheap price, compared to the new models, and were offered along with good services by the Used/pre-owned car stores. This threat could be avoided by launching the models at a cheaper price. But, the threat always exists. The buyer could opt for the high end model in the used vehicles. Also, the demand for electric cars is reaching new heights, even though the market for those vehicles is very little as of now, the perspective of the people towards environment has changed a lot in the past few years, and everyone is trying to be responsible on their part, and in the future they might prefer electric vehicles over automobile vehicles, so companies need to invest huge amounts, in the manufacturing the electric vehicles in the future. So, the risk of the threat of substitutes could be placed in a range of high to
The automotive industry is without a doubt an industry that has massive implications relating to the United States economy as well as affecting every American household. Shifts in the supply and demand of automobiles influence the current and future household purchases. Households must determine what amount of their hard-earned income to allocate to certain necessities. Because most households have a budget, the amount spent on transportation it limited. While most industries have an effect on the economy, the automotive industry has far-reaching implications for most Americans. Not only are the workers affected but the many spin-off jobs created as well as the consumers that must purchase the automobiles manufactured.
During the Great Depression, every work place was hit hard and many were out of work. The demand for vehicles declined, and the automotive industry took a hit. Once the Second World War began, the automotive industry was given a push in the right direction, and their vehicle production flourished...
The automobile sector has been a robust sector that has experienced tremendous growth in the past seven to eight years. Apart from two years in particular -2008-09 & 2012-13, there is general trend of ten percent plus growth in various segments like passenger car, commercial vehicles, two and three wheelers. The following chart shows the growth rate of various years in each sectors.
The world of technology is ever changing and advancing. With the automotive industry in play technology is constantly surpassing what is available today with what can be done for tomorrow. Technology and the automotive industry go hand in hand with constant improvement to components of cars. Due to technology advancement there is competition within the car industry, especially between American car companies and European car companies. European car companies provide their buyers with innovative variety and revolutionary luxuries. European car technology is superior to American car technology due to their safety, entertainment, and luxury features.
Model T’s were everywhere in America, even long after Ford stopped production in 1927. (Henry) While Ford was the number one brand, selling the most cars throughout the early 1900’s, the Model T created a new industry that is distinctly American; the auto industry. Three manufacturers, Ford, General Motors, and Chrysler dominated the American auto industry, and all three companies still produce cars today. The Model T gave birth to the competitive auto market. To this day, car companies in America are constantly racing to innovate, improve, and outsell their competitors. Manufacturing of cars “became the backbone of a new consumer goods-oriented society. By the mid-1920s it ranked first in value of product, and in 1982 it provided one out of every six jobs in the United States.” (history –idk yet) The demand for cars also resulted in a booming petroleum industry, and a high demand for metals, like steel. ( History idk yet) Furthermore, with so many people driving cars, construction of roads was necessary. The popularity of automobiles set off a chain reaction that created new opportunities all across the country. All sections of the modern automotive industry, from marketing to manufacturing, as well industries like petroleum refining, steel production, and road construction, can trace their beginnings to the Ford Model
The threat of substitutes is a low force for the company. The substitutes of Ford are public transportation and bicycles; however, people do not use public transportation and bicycles daily because customers take into consideration the loans they pay for their Ford cars, so they prefer to use their cars frequently (Ferguson, 2015). Even though these substitutes are the cheapest options for customers, customers know that those are neither fast nor comfortable and nor safe. There are other car brands in the market; however, customers tend to remain loyal to
Since the 1890s, the time when the automotive industry began, the industry has developed rapidly. The industry started its development in the US, which contributed over 90% of the global vehicle production before the Great Depression (Popular
Automobiles are a necessity today, just as they were back in the early 1900’s when Mr. Ford built and started his company. Over 100 years ago, the Model A, and Model T were very basic and made of heavy steel to withstand the use and the harsh environments they faced (Ford, 2015). Throughout American history the automotive industry continues to change, and the changes create a ripple effect on the industry in regards to competitors, labor force, suppliers. While there is no real threat of a new auto manufacture, joining America’s Big Three, there is a threat when one of them introduce a new automobile or completely redo an existing one, like Ford’s latest F-150 series. These changes create additional effects felt by others outside of the automobile industry.
This case study is an analysis of the trends and mechanism of the car industry through a focus on “Porsche” which is one of the premier players in the automobile industry. This case study provides a global perspective of the automobile industry, with a focus on car industry through the premier company, Porsche. Porsche was founded in 1931 by Ferdinand Porsche, along with his son and son-in-law, Anton Piëch, father of VW Chairman Ferdinand Piëch. Known in its early days as the Porsche Engineering Office, Porsche did not start off as an automaker, but rather a firm that sold design and engineering services to other carmakers. In 1934, Adolf Hitler commissioned Porsche to make a “people’s car” or “Volkswagen.” The forerunner to the VW Beetle, the VW Type 60 hit the roads in the mid-1930s, and in 1938 the first plant dedicated to the manufacturing of the VW was opened. It wasn’t until 1948, three years after the end of World War II, that Porsche produced its first branded sports car. Within two years,...
In 1944, Kia Motors Corporation of Seoul, Korea, was founded as a manufacturer of steel and bicycle parts (Kia.com). During the early1950’s, the company changed its name officially to Kia Industries and began production of Korea’s first bicycle (Kia.com). In 1957 Kia began producing Korean’s first motor scooter, the C-100 (Kia.com). Korea’s first truck, the K-130 was introduced in 1962 (Kia.com). In 1971, the Titan, a 4-wheel cargo truck was produced (Kia.com).
Although GM faces fierce competition within the industry, GM has risen to the challenge by introducing into its production line gas efficient cars, in addition to improved the company’s image and customer service to name a few. Nonetheless, the company profit, and its share of the market, is reduced by the durability of some of its competitors’ products (“General Motors,”2015). Threat of new entry The auto industry by design has high barrier to new entrants into the industry, entering into the automobile industry would be a large capital investment to any company, such a barrier and many others tends to protect automobile makers such as GM from the possible detrimental impact of new entrants into the industry. Bargaining power of suppliers The GM has numerous parts that they purchase from numerous suppliers across the world.
Automotive industry began in the 1890s in the United States. As a result of the domestic market size and the use of mass-production, the industry grew so quick into the largest in the world. The United states is the second largest automobile manufacture in the world by volume with over eleven million manufactured in 2014 according to a survey conducted by Organisation Internationale des Constructeurs d 'Automobiles (OICA).
Starting in the 1920’s America began its shift towards a consumer culture as the economic growth of the nation began to depend more on the proliferation of consumer goods than of capital goods. Even at the outset of this trend, the automobile held a significant place in the new consumer economy. The automobile, which was once thought of as a rare luxury, was being sold by the millions. Assembly lines were becoming more efficient, thus allowing cars to be made more cheaply allowing the price of automobiles to drop. The growth of the automobile helped stimulate the economy through its dependence on other industries such as glass, rubber and steel, which were connected to the production of cars. These automobile related industries created new jobs, greater affluence and more spending power for millions of American consumers. Even at the beginning of America’s transformation into the consumer culture of today the automobile was at the forefront this conversion.
A vehicle is one of the biggest purchases a person will ever make. Over the years, the prices of an automobile have increased due to the rise of inflation. Due to a price index, the price of an automobile changes over a certain period of time. Economists compare averages of automobiles to calculate the cost of each vehicle that presents itself on a car lot. When all of the above is calculated within the purchase of an automobile, it affects every area of making the automobile to selling the automobile. All of these factors are impacted together for the automobile industry as a whole.
The automobile industry is a pillar of global economy. Globally automotive contributes roughly 3 % of all GDP output. It historically has contributed 3.0 – 3.5 % to the overall GDP in the US. The share is even higher in the emerging markets, with the rates in china and India at 7 % and rising. China produces the highest number of automobiles followed by US and Japan (oica.net, 2015). The industry supports direct employment of 9 million people to build 60 million vehicles and parts that go into them (oica.net, 2015). Many other industries such as steel, iron, glass, aluminium, textiles etc. are associated with the automotive industry and resulting in more than 50 million jobs owed to the auto