BBDT3073 STRATEGIC MARKETING & DECISION MAKING

Tutorial: 3 Group: 3RMK S2G3 (5)

Title: Porter’s Five Force of Competitive Analysis (Automobile industry)

Group members:
1) Leong Voon Kee 1809693 (Group leader)
2) Bryan Ooi Yeung Foong 1809624
3) Khaw Tze Yen 1809674
4) Leow Yi Ying 1809694
5) Wee Jie Ling 1809749
 Bargaining power of suppliers
• The bargaining power of suppliers is the supplier’s ability to affect the price they
charged for the supplies which including of raw materials, labour, and services.

• The supplier power will increase when supplier’s products create high switching
costs.

• The bargaining power of automobile’s supplier in Malaysia is consider low.

• Based on the research, Malaysia automotive industry is the third largest in Southeast
Asia, and the 25th largest in the world, with an annual production output of over
500,000 vehicles.
• There seem in the automobile industry like Proton and Perodua have many suppliers
that the firms can choose to get the raw materials.

• Resources like metal, raw materials, leather, cooling system, electrical system and
others many system are all bought from hundreds of different supplier or differences
bargaining prices distribute across Malaysia.

• They could easily switch to other suppliers in the industry that provide more benefits
because the switching cost is low.

• Most of the vehicle manufacturer own many interchangeable suppliers, and also has
ability to produce the components by their own.
 Bargaining power of buyers

• The bargaining power of buyers in automobile industry are extremely strong.

• A large part of the buyers are small individual buyers who buy single vehicles.
But, there are corporations and government agencies that are buying fleets of
vehicles.

• Whether small or large buyers can easily switch to a new brands because there
are no extra costs involved in switching to another brand.
 The buyers are price sensitive and therefore would switch to another brand offering a
better product at a lower price.

 Brands focus on developing customer loyalty through design, quality and competitive
pricing.

 Competition in the automobile industry has increased rapidly and rising consumer
trends have also led to an increase in customer bargaining power.
 Threats of Substitutes

- The threats of Substitutes is strong

- There are several substitutes and alternative modes of transportation including

taxis, buses, trains and planes.

- None of them can provide the kind of accessibility and convenience that owning an
automobile does

- Owning a car is convenient

Threats of new entrant (low)
 Difficult for new brands to enter because it needs large investment for establishing a
car brand.

- manufacturing facilities, distribution network and for hiring skilled staff.

 Another major barrier is the level of competition from the existing brands.

- Unless the new brand creates innovation and differentiated product.

 Entering new markets is not easy

- Malaysia government have applied high import taxes to discourage foreign.

- Eg, Import duty on vehicles ranges from 150%-300%, depending upon the cc of the
engine. Sales tax calculated is based on the 10% of (CIF+ import dutycharged).
 Intensity of rivalry
• Competitive rivalry in the industry is very strong.

• Automobile industry in Malaysia is strong as there are numerous

competitors and they are equally balanced, they will compete to gain
market share.

(Perodua, Proton, Honda, Toyota, Nissan, Suzuki, Subaru, Hyundai,)

• Exit barriers for automobile is very high due to high fixed costs.

(Factory, labor agreement, specialized assets)

• Experiencing slow growth as he market in Malaysia has penetrated.