AUTOMOTIVE INDUSTRY

The great recession had hurt the automobiles industry pretty badly where some of the
most well-known brands were on the verge of extinction. Had not the government
intervened it would have been quite difficult for these brands to survive. However,
now the recession is past, things have started getting back on track and the automobile
industry is flourishing again. Apart from great technology and design, now the
focus is on passenger safety and environment friendliness. Pretty soon, it will be an
era of autonomous vehicles.
Threat of new entrants: Low

It is difficult for new brands to enter the automobile industry which is because of the
large investment required. Initially, a quite huge investment will be required to set up
the manufacturing facilities, distribution network and to hire skilled staff.   Another
major barrier is the level of competition from the existing brands. Unless a new brand
brings an innovative and differentiated product to the market, chances to gain a market
share are low. While law does not mean a barrier for the new entrants, still brand
image and reputation can be major challenges before new players. Brand image is a
major competitive advantage for the existing brands. Any new brand would have to
focus a lot on engineering and product quality. Getting access to raw material can be
easy but then achieving economies of scale difficult for small players. Moreover,
penetrating new markets is not easy either. Some governments have applied high
import taxes to discourage foreign brands. So, there are several factors that minimize
the threat from the new players
Bargaining power of suppliers: Weak

The bargaining power of suppliers in the automotive industry is weak for most of
them are small players. Only few of them are significant in size. The threat of forward
integration is minimum from the suppliers for the reasons discussed in the first
category. These suppliers have to play per the rules set by the brands. The brands hold
immense clout because the raw material is always available in plenty and switching
from one supplier to another is not difficult for them.  In this way, the bargaining
power of suppliers is considerably low.

Bargaining power of buyers: Moderately strong

A large p[art of the buyers are the small individual buyers that buy single
vehicles. However, there are corporations and government agencies that buy
fleets of vehicles. Such buyers are in a  position to bargain for lower prices.
Whether small or large buyers can easily switch to a new brand. There are no
big costs involved in switching to another brand or  to a alternative mode of
transportation. the buyers are price sensitive mostly and would switch to
another brand that  offers lower prices. However, none of the buyers  whether
big corporations or individual small buyers  poses a threat of backward
integration., Still, based on the overall picture their bargaining power is
moderately strong. Brands focus on building customer loyalty through design,
quality and by offering competitive prices.