Industry Analysis Using Porter´s Five Forces Model

1.0 SECTION ONE: INDUSTRY ANALYSIS

1.1 Features of the Industry
The automobile industry experienced intensive competition and low profitability in the past due to crisis.
The ‘Five Forces’ model advanced by Porter is influential in its capability to designate many market conditions. This framework predicts the profitability of a market, it is a powerful tool for analysing industries, but firms should consider number of problems experienced when it is used. The major problem are to do with industry definition, the static nature of the model, low cost-differentiation axis.

Figure 1.1 The Porter’s Five Forces Model

Source: Luffman, Lea, Sanderson and Kenny (1996. p50)

1.1.1 Threat of Entry
Profitable markets attracts new entrants, but as a result of intensive competition in the industry, the profitability of the automobile industry erodes. Goodstein, Nolan and Pfeiffer (1993. p251) states that “in considering such potential entrants, the planning team needs to recognise that there are barriers to entry that make the industry resistant to incursions by outsiders…” Firms in the industry may have specific aptitudes that new entrants cannot possess, and as a result for this, it creates barriers for them to enter the industry.

1.1.2 Bargaining Power of Buyer
Many factors lead to buyers having considerable power in a market, thus price elasticity is determined by the relative economic power of buyers in the market. A greater tendency for customers to switch suppliers of automobile on the basis of price, is a result of the merging manufacturing design...

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...nclusion competitive in an intense market can be created through the ability of a manufacturer to lower its costs. Therefore, suppliers of components and materials and customer support permits a closer negotiation of cost reduction in the industry.

3.0 REFERENCE LIST

i. Dwyer, F. R. and Tanner, J. F., 2009. Business Marketing: Connecting Strategy, Relationships, and Learning. International Edition. New York: McGraw-Hill Companies, Inc.

ii. Goodstein, L., Nolan, T. and Pfeiffer, J. W., 1993. Applied Strategic Planning: How to Develop a Plan that Really Works. New York: McGraw-Hill.

iii. Johnson, G., Scholes, K. and Whittington, R., 2006. Exploring Corporate Strategy. 7th Ed. London: Prentice-Hall.

iv. Luffman, G., Lea, E., Sanderson, S. and Kenny, B., 1996. Strategic Management: An Analytical Introduction. 3rd Ed. Cambridge: Blackwell Publishers Inc.