The Power Of The Customers In The Automobile Industry

809 words - 4 pages

1. The power of Customer
There are two categories of customers in the automobile industry: final customer, the actual users of the end product and industry’s customer, for instance manufacture company buying the necessary items from the supplier. The power of customer is the extent of an impact that the buyer has on a supplier or manufacturing business. Buyers are powerful if:
• Purchase of large volumes
• The product is standardized
• Low switching costs
• Price sensitive
• Threat of backward integration

1.1. Ultimate customer
Private customer is price sensitive. The cost of purchasing the car represents a significant percentage of consumer budget, therefore the price will become very important factor while choosing a product. Consumer will look for getting the optimal variant of the car for most favourable price. While searching for the preferable deal, there is an opportunity to access the necessary quantity and quality of information to compare different car models and manufacturers. Due to the Internet the availability of information has increased, therefore consumers can easily access different data, such as car price fluctuations, statistics, performance, ratings, etc.
Due to the changes in economical situation, consumer preferences and tastes, the demand for the cars is unstable. Therefore, the car manufacturers face the challenge to conform to changing demands quickly and meet the requirements in order to win the order. However, in some cases the particular company fails to keep up, as a result, the consumers become disappointed with offered products. Due to the low switching costs and quite standardized nature of product consumer has the possibility to search for alternatives. The report from American Consumer Satisfaction Index in 2011 announced that the buyers of foreign-built models were more satisfied with their purchases than those who bought the American vehicles.
On the other hand, automobile industry continues on being powerful, because of the large buyer producer ratio. Furthermore, since final buyers do not purchase high volumes of cars, they do not represent a large fraction of industry’s revenue.

1.2. Industry’s buyers
There are many different items needed, in order to manufacture a car. Therefore, the firm has to have very high control and insight on their supply chain. Kraljic’s matrix is a tool that helps to segment suppliers into 4 categories. By using the matrix, it is possible to differentiate items based on the their availability on the market and the extent of significance for the ...

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