Emer

Q1.

The global automotive industry is extremely competitive with many existing experienced large players whom is competing to gain market share. Therefore, there are high barriers which makes it more difficult for the new entrant to enter the industry. To further evaluate the factors that will be the challenge for for a new entrant using the Porter’s five forces model (Porter, 2008).

Barriers to Entry

It requires high capital investment to set up the production or manufacturing sites, investing in technologies along with subject matter experts in their management and other marketing or distribution cost. Also the fact that new entrant will need to compete with existing multi-national with their reputation and their ability to offer competitive prices to the customers with their large productions of different range of car models. Lastly they will also need to look at areas such as safety, reliability, durability or constant improvement of fuel consumptions which are factors that will affect the buyer decision.

Threat of Substitute

The threat of substitutes is not limiting to competition within the industry itself such as consumer may choose a particular car model to another as they believe in lesser fuel consumption for more power. With the increase of fuel price, consumer may seek alternative methods of travelling such as public transportation. Automobile manufacturers will need to design their car with less fuel consumption to provide a more cost efficient solution to the consumer. However, if the fuel price is constantly increasing this will become a constant threat.

Competitive Rivalry

Automotive industry is a mature one which means that the competition will only gets tough over time. As the industry growth is flat the existing seasoned manufacturers will have cost advantage over a new entrant due to their large market shares which took them years to earn. Automobile manufacturers are constantly improving and providing different...