Application of porters five forces model to auto industry

Reference no: EM133195205 , Length: 10 Pages

Assignment:

In 2009 the American auto industry was in a dire economic state. Chrysler was, M was on the brink of bankruptcy, and Ford's future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our national economy and specifically the economies of Michigan and Ohio.

Economists occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. According to Porter, his model should be used at the industry level, defined as a marketplace in which similar or closely related products or services are marketed. This research paper requires the application of Porter's Five Forces Model to the auto industry.

Porter's analytical framework consists of those forces that affect a producer's ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:

1)The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.

2)The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.

3)The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.

4)The bargaining power of customers: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the products, etc.

5)The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

References

Porter, M.E. (1979) "How competitive forces shape strategy", Harvard Business Review, March/April 1979.

Porter, M.E. (1980) "Competitive Strategy", The Free Press, New York, 1980.

Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985.

Develop a detailed paper applying Porter's Five Forces Model to the American automotive industry, with a focus on the U.S. market.

Reference no: EM133195205

Questions Cloud

Analyze the biosocial systems principle : Understanding the biological, social, and emotional principles that affect families over their lifetime is important for human services professionals.

Protecting the species while providing jobs for locals : Chose an area that is economically depressed but has a lot of species diversity, you need to protect the species while providing jobs for locals.

Developing a balanced scorecard : Developing a Balanced Scorecard - There are many reasons to employ strategic planning tools such as the balanced scorecard (BSC)

Evaluate clinical site counseling curriculum : Grand Canyon University-Evaluating and selecting the counseling curriculum to be implemented in a school setting is essential to its success.

Application of porters five forces model to auto industry : This research paper requires the application of Porter's Five Forces Model to the auto industry. Central Texas College. ECON 600.

Prepare for wiring a research paper in psychology : Again, you are not writing the actual paper in this class! My goal is to teach you how to prepare for wiring a research paper in psychology.

Russian blues reveal effects of language on color : Provide a short summary of the findings from the paper. A helpful way of summarizing papers:

Employee information in the workplace : Inchicore College of Further Education - the Key Steps an employer must take to Ensure Compliance with Data Protection legislation

How do people learn about their culture : How do people learn about their culture? How does culture affect human interaction? How do people change culture?

User Account

All Pages