The demise of the U.S. auto industry|Essay helper

Posted: February 20th, 2023

In  2009 the American auto industry was in a dire economic state. Chrysler  was in Chapter 11, GM 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.

apply Porter’s Five Forces Model to the American  automotive industry, with a focus on the U.S. market.

1. Cover page with a running head 2. Abstract 3. Introduction to the Auto Industry 3.1. Industry Definition 3.2. Industry Profile 3.3. Industry Market Structure 3.4. Future Outlook

4. Porter’s Five Forces Strategy Analysis as it applies to the Auto Industry 4.1. Bargaining Power of Buyers 4.2. Bargaining Power of Suppliers 4.3. Competitive Rivalry in the Industry 4.4. Threat of New Entrants 4.5. Threat of Substitutes

5. Conclusion 6. References

SOLUTION

4. The bargaining power of customers: Powerful customers can exert pressure to drive down prices, or demand higher quality or more services, thereby capturing more value for themselves.
5. The bargaining power of suppliers: Powerful suppliers can demand higher prices or dictate quality or service standards, thereby reducing the profitability of firms in the industry.

Applying Porter’s Five Forces Model to the auto industry, we can see that:

1. The threat of substitute products: The auto industry faces significant competition from alternative modes of transportation such as public transit, ride-sharing services, and electric bikes. The rise of electric and autonomous vehicles also creates the potential for disruptive substitutes in the future.
2. The threat of the entry of new competitors: The high capital requirements to enter the auto industry, along with the need for extensive research and development, make it difficult for new firms to enter the market. However, the rise of electric and autonomous vehicles could potentially lower these barriers and increase the threat of new entrants.
3. The intensity of competitive rivalry: The auto industry is highly competitive, with a few large firms dominating the market. Firms compete on a variety of factors, including price, design, quality, and innovation. Non-price competition also plays a significant role in the industry, with firms offering financing, leasing, and other services to attract and retain customers.
4. The bargaining power of customers: Customers in the auto industry have significant bargaining power, with a wide variety of options to choose from and the ability to compare prices and features online. Firms must compete on price and quality to retain customers and maintain market share.
5.