General Motors: The Decline Of An Automotive Giant

1341 words - 5 pages

Question 1: Using Porter's 'five forces' framework, discuss the competitiveness of the global automobile market.Porter's five forces framework is a model of competitive industry structure. These are the threat of entry of new competitors, the threat of substitutes, the bargaining power of buyers and of suppliers and the rivalry between the existing competitors. Where these forces are intense, below-average industry performance can be expected; where these forces are mild, superior performance is common. (Jobber, 2007).Before we discuss about the barriers of entry to the global automobile market, we have to understand what barriers to entry is. In a market, when all the firms are making profit, there are new comers to the market in order to gain profits as well. Therefore, the industries possess characteristics that protect high profit level of the firms and inhibit additional rivals from entering the market. These are barriers of entry. They characteristics may be economies of scale, capital requirement, switching costs, access to distribution, government policy and brand identity. In global automobile market, the barrier to entry to the market is low. The low cost competition causing many new comers enter to the market and eroding its market share. Besides, the common technology has lowered the barriers to enter the market as well.In Porter's model, substitute products refer to products in other industries. While the treat of substitutes typically impacts an industry through price competition, there can be other concerns in assessing the threat of substitutes. In the automobile industry, the threat of substitutes can be considered as high because there are many choices to the customers. It is due to the similarities of the vehicles with no big different on the price.A producing industry requires raw materials which are labour, components and other supplies. The industry need to buy the raw material from other firms to create the products. So, it generates buyer and supplier relationships between them. The power of suppliers in the automobile market is low because there are many competitive suppliers. They are producing similar vehicles, although the brand is different but the consumers see it as no different. Moreover, the credible is backward integrated by the purchases and the consumers are weak in the market.The bargaining power of the buyer shows the impact that customers have on a producing industry. If the power of buyers is strong, they are able to set the price for the product. When there are few buyers but many sellers in the market, the power of the buyer is strong; it is the case in the automobile market. Buyers are threatening to integrate backwards which make threats to buy producing firm or rival. So, the suppliers cannot integrate forward.Lastly, come to the rivalry between the existing competitors. In order to measure the degree of rivalry in the automobile market, we have to see from the product differences, brand identity, and...

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