Automotive Industry U.S.

Analyzing Automobile Industry Attractiveness

Porter’s Five Forces of Competition

* Threat of Entry

* Rivalry between extablished competitors

* Bargain Power of Suppliers

* Bargain Power of Buyers

* Substitutes

THREAT OF NEW ENTRANTS

The analysis of threat of new entrants in this market shows a very low fear by those companies that already belong to the industry, as we explain as follow.

As showed in Exibit. American customers are radically positioned in the automotive market, with loyal consumers; furthermore, there are different other barriers to protect the industry that we can analyze in two different ways: on one hand, it is quite impossible that a start-up comes out and decide to enter this market: the industry is very mature and it has successfully reached economies of scale. In order to compete in this industry a manufacturer must be able to achieve economies of scale. For this to occur, manufacturer must mass-produce the automobiles so that they are affordable to the consumer.

Another barrier to entry is that it takes an incredible amount of capital to manufacture the automobiles; this is valid not only to be able to manufacture the products but also to keep up with the research and development that is necessary for the innovation requirements.

On the other hand, it could be quite difficult even for a well known company to enter different markets, as the U.S. car market. First, the access to distribution channels is an extremely high. A company must find a dealership to sell their automobiles, or have their own dealership. Space in the dealerships lots is very limited, making it difficult to have a wider variety of inventory.

Whereas Fiat can rely on the already existing dealership of Chrysler, all other firms, not still present on the U.S. market, must build a way to dealer their products.

One of the most threats by other company is due to the environment, and to the pollution reducing. Tata motors is one of this...