Individual Assignment – Porter 5 Forces. Essay Example

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    Business
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    Undergraduate
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5Australian car manufacturing industry

Australian car manufacturing industry

Porter’s five forces

Threats of new entrants; profitable markets attract new entrants due to the high profits got from these markets. This decreases the profitability got of the existing companies, for instance, the new car manufacturers selling cars made in China and Europe have flooded the Australian market. To prevent the existing car manufacturers creates factors that make it difficult for new entrants (Porter,
2012, p. 27). These include, capital requirements, absolute costs and so forth.

Threat of substitute products; supplementary products exist in a market which makes it easy for consumers to switch between alternatives. For instance the presence of motorbikes, this can be well described by the case of coca cola and PepsiCo. The potential factors affecting such a market include; buyer propensity to buy, perceived level of differentiation, where some people will prefer to go for motorbikes at the expense of cars (Rosenberg, 2008, p. 45-47).

The bargaining power of consumers; the ability of the consumers to put a company under pressure on the prices to sell their products is also a vital factor in any industry. Firms strive to reduce the power of the market by creating brand loyalty. Buyer power increases with the availability, of plenty alternatives (Roy,
2009, p. 72). This is what has been happening in Australia, where customers can bargain and negotiate prices due to the large variety of complementary products.

The bargaining power of suppliers; this is power of suppliers which manifests itself if the only suppliers available are limited, and there are no available alternatives. Suppliers might be in terms of providers of labor, raw materials and services. Suppliers may refuse to work with car manufacturing companies or charge extra costs for unique services in the country.

Intensity of competitive rivalry; in most markets, there are two rivalry companies competing vigorously. The competition becomes so severe that the companies have to apply the following factors in order to stand out; innovation, online services to reach numerous customers, the adoption of powerful competitive strategy and the recruiting and sourcing of talent for top of the class human resource (Manuka, 2010, p. 56-58). In Australia the car manufacturers are so many such that the competition is increased and elevate from the level of two companies to several car manufacturers.

Australian car manufacturing industry

The Australian market has been so competitive when it comes to the manufacturing of cars. This has been so due to the presence of a lot of major car manufacturing in the nation. These include: Holden, a subsidiary of General Motors, and Ford Australia, while Toyota Australia manufactures local variants of its international models, particularly the Camry. This shows that substitutes for the products are available such a situation also prompts the bargaining power of the consumers. The availability of many companies, though, eliminates the bargaining power of the suppliers since companies are many, however in this scenario the suppliers may be accruing their power due to the sale of cars from China and Europe (Baker, 2007, p. 56). This may seem like a relevant point, however disputable since if the supplier’s cars may not wish to eliminate the selling companies since this will lead to non-profitable for them.

Threats of new entrants may be the greatest threat facing the industry since, cars from the rival nations that manufacture cheaply, that is, China and Europe are the major cause of the decline in sales. Three companies have announced their exit in the Australian market over a span of nine months, the main factor that has contributed to this in relation to Porter’s five forces is threats of new entrants, leading to availability of lots of substitutes which then leads to increased bargaining power of the consumer (Dural, Rosenberg Publishing.
Bottom of Form

Hartwich, & Centre for Independent Studies, 2009, p. 78). A factor like the bargaining power of the supplier is on the low. It is also important to point out that the intensity of competition is also very significant in the Australian car manufacturing industry.

References

Top of Form

Baker, K. J. (2007). Economic tsunami: China’s car industry will sweep away western car makers.

Dural, N.S.W: Rosenberg Publishing.Bottom of Form

Edgerton & Moor Prop. (2010). A monthly journal devoted to motor cars, motor cycles, motor boats. The Australian motorist. 3 (4), 45-47.

Hartwich, O. M., & Centre for Independent Studies (Australia). (2009). With no particular place to go: The Federal Government’s ill-conceived support for the Australian car industry. St Leonards, N.S.W: The Centre for Independent Studies.

Manuka, A.C.T: The Club. (2010). The Edwardian: Official journal of the Veteran Car Club of Australia. Veteran and Vintage Car Club of Australia. 7 (9), 56-58.

Roy, D. (2009). Strategic foresight and Porter’s five forces: Towards a synthesis. München: GRIN.