Trends in the Automotive Industry

Trends in the Automotive Industry

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Trends in the Automotive Industry
1. Consolidation

The trends in the automobile industry present through the 1990s
intensified as the industry moved into the twenty-first century.
Global convergence stood out as a major issue. And the consolidation
was continuing from 1990 to 2000.

2. Mergers and acquisition

There was a great deal of consensus amongst commentators that in a few
years the industry would consist of no more than six giants, with a
peppering of niche players. Mergers and acquisition activity moving
from automobile manufacturers, already highly concentrated to parts
suppliers.

3. Technology

The Internet and e-commerce---- shortening the lead-time

The Internet and e-commerce play a vital role by shortening the
lead-time for the production of an automobile. If given the importance
of the purchase, customers could be brought into a Web-driven
relationship with automobile suppliers and manufacturers, a shortening
of the lead-time was a distinct possibility. The Internet allows for a
more accurate assessment of demand, not only of its volume, but also
of the kind of vehicles and optional extras the market required.

Business-to-business network----just in time

As far as manufacturing was concerned, considering that a typical
automobile was made up of more than 20,000 parts provided by about 200
suppliers, all due to be delivered ‘just-in-time’, a
business–to-business net work looked remarkably useful.

I will apply Porter’s five forces framework to the segmentation of
luxury cars in automobile industry in this question. The five forces
framework helps identify the sources of competition in an industry or

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sector. The five forces are the threat of entry, the threat of
substitutes, the power of buyers, the power of suppliers and
competitive advantage.

The threat of entry:

The threat of entry is high in luxury cars segmentation. They need
high technology to produce the luxury cars. And the capital
requirement of entry is quite high as well.

The threat of substitutes:

The threat of substitute is high.

The power of buyers:

The power of buyers in luxury cars segmentation is tending to be low.
There are few alternative resources of supply. Because comparing with
other kinds of cars there are only few manufacturers produce luxury
cars. And we know that not everybody can afford luxury cars, and the
persons who can afford luxury cars won’t buy 3 or 4 at once or change
them to a brand new luxury car in one month. So we can see that the
volume purchase of the buyers is low. This is another reason to the
low power of buyers.

The power of suppliers:

The power of supplier in luxury cars segmentation is low. A typical
automobile was made up of more than 20,000 parts provided by about 200
suppliers. We can see that there is no concentration of supplier. A
large number of companies doing the same technology, there’s a lot of
choices for the manufacturers of automobile. Also, the switching cost
is low among the numbers of suppliers.

Competitive rivalry:

The competitive rivalry in luxury cars segmentation is high. The
extent of luxury cars competitors are in balance. They have roughly
equal size. There is the danger of intense competition as one
competitor attempts to gain dominance over another. And also the
product differentiation is not distinct. It makes the competition
among the luxury cars manufacturers is high.

By using the Porter’s five forces framework to analysis the external
environment, we can see that the threat of entry is high, the threat
of substitutes is high, the power of buyer is tending to be low, the
power of suppliers is low, and the competitive rivalry is high. We can
foresee that


I will choose the luxury cars markets as my segmentation in which BMW
compete in this question.

The critical success factors in the luxury cars segmentation:

Highly qualified labour force. In the twenty-first century, the
scarce resources that most influence national competitiveness are
likely to be the skills displayed by the workforce. One of Germany’s
distinctive national resources was a highly qualified labour force
that could be used by German manufacturers as a source of competitive
advantage. Most of such advantage went to companies such as BMW,
managed to build a perception of valuable differences in the minds of
their buyers.

The BMW brand. BMW had traditionally taken great pride in the
quality of its engineering. And BMW employed a highly skilled German
labour force, so they get the benefits of a reputation for
high-quality products.



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