According to Michael Porter, there are five factors that should be used when analyzing the potential profitability of a business inside a specific industry (Parnell, 2014). Porter’s five factors include: the intensity of rivalry among incumbents; the threat of new competitors; the threat of substitute products; the bargaining power of the buyers; and the bargaini...
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...tly, Manheim does not face a large number of competitors which does limit the bargaining power of the consumer slightly. There are a few other avenues available to wholesaler buyers in the used automotive marketplace, however overall buyers fees between these options are fairly consistent. Finally, the bargaining power of sellers does play an important role in the profitability of this industry. There are a number of automotive dealerships that utilize the services of an auto auction, however the largest customers of our auction are our commercial and fleet-lease customers. Customers such as Ford Motor Credit Company, Toyota Financial Services, and Capital One provide an increasingly large portion of our overall vehicle inventory. The seller’s bargaining power with our company and industry allow for them to control many of the terms and conditions of their contracts.
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