Porters Five Analysis Of The Automobile Industry In The UAE
Make a group project and it is on automobile industry analysis in the
UAE. We divided the work in the group members so I need you to do
my part which is in red.
This is the INDEX:
1- Introduction
2- Toyota over view
3- What is porter 5 forces
4- Bargaining power of supplier
5- Bargaining power of customer
6- Threat of substitutes
7- Threat of new entrants
8- Competitive rivalry
9 – Conclusion
10- What did u learn
11- Reference
4 Pages. Additionally I also need a PowerPoint slides on my part. 4
3 Slides should be enough. Each slide with 7 bullet points. The file
attached is a sample that you can look at to get an idea.
Solution
Introduction
The porter five is a model of analyzing the market situation of any industry and it is
normally used by companies when they want to improve their competitive strategy. This model
was introduced in 1979 by Michael Porter and has been a useful tool since then. The model
suggests that there are five elements that contribute to the competitive strength of a company
which are, competition among companies in the industry, the strength of the supplier, the power
of the customers, the possibility of a product being overtaken by substitute commodities in the
market and finally the likelihood of new companies joining the industry. Each of the elements of
the porters five model is useful and all of them should be carried with equal weight. Like any
other industry in the country, the automobile industry in the UAE can be analyzed using the
porters five model and this section of the model seeks to show how the model can be effectively
analyzed with regard to the automobile industry.
Toyota Company Overview
Sakich Toyoda was the founder of the Toyota industries and he did so in 1926. The main
goal of starting the Toyota industries was to make known to the automatic looms which Sakich
had come up with. Before he could make the automatic looms available to people he ensured that
their activities has been perfected for everyone to enjoy. With time, Toyota industries expanded
to other forms of business though in the same line and it has been a successful company. Toyota
industries therefore stopped majoring in the loop only but also engaged in automotive production
which included engines, compressors vehicles and air conditioners. The company also engaged
in the production of textile machinery as well as logistics solutions and electronic production.
Porters Five Analysis Of The Automobile Industry In The UAE 3
With time, Toyota industries were found in other continents such as Asia, North America and
Europe which further led to making the company famous. Toyota Industries is dedicated towards
serving their customers with the best of the automotive solutions in the best way they can by
incorporating creativity and innovation time after time (Grundy, 2006).
Competitive Rivalry
Within an industry there are several companies each working to outdo the others in one
way or another. When the competition is high, the effects are felt on the prices of the
commodities produced and the potential of a commodity being of profit to a given company.
Propellers of high competition include the existence of companies with similar growth strategies,
few companies in that particular industry and when products of different companies within the
industry are so much similar leading to a tough competition especially in price. Competition in
the automobile industry is not as a result of price but mostly models. Companies therefore try to
come up with new models to attract customers.
Supplier Bargaining Power
Suppliers are all those stakeholders of a business whose role in running the business is
mostly to provide inputs or rather materials that facilitate the production of goods and services in
a company. The bargaining power of these suppliers varies depending on several factors within
the industry such as when the suppliers are few; the bargaining power of the suppliers is high
compared to when the suppliers of the same commodity are more. Also, the bargaining power of
suppliers rises when there are few or no substitute of a commodity and the cost of diverting to
other supplier are too high for companies. In this case, the suppliers deal with their customers at
their price without negotiations as they see the customers as desperate for a particular input.
Porters Five Analysis Of The Automobile Industry In The UAE 4
Companies therefore ought to minimize the impacts of their input suppliers to their competitive
strategies bearing in mind that they cannot do without them. Supplier strength manifests itself in
terms of auto spares seeing that automobiles are not commodities that one can purchase every
now and then (Crook, & Combs, 2007).
Customer Bargaining Power
A customer refers to a potential purchaser of a commodity in the total population. Just
like the value of the supplier in the endeavors of a company, the company cannot do without
customers. It is therefore wise of any company to consider the views of customers regarding their
products or they would miss the essence of the whole production process. For instance when
there is a possibility of the customers coming up with a product that could well serve the same
purpose of the commodity in the market, they may take advantage of this and consider to
purchase it at a lower price. For the automotive industry, customers taste and preferences is a big
issue and companies need to address this otherwise purchases from outside the UAE will be
made. However the impact is small on price as the possibility of purchasing automobile in bulk
is limited.
Threat of Substitute Products
Substitutes for a given products are those commodities that can be used in place of a
given product to give the same satisfaction, slightly different and in most cases, they appear in
the market at lower prices. Companies need to pay close attention to the emergence of these
substitutes as they greatly affect the performance of a given product. For instance if it happens
that a given product has substitutes that are performing better it is given that customers will
purchase the substitutes in place of the given product. The most important aspect of the presence
Porters Five Analysis Of The Automobile Industry In The UAE 5
of substitutes of a product in the market is the ability of it pulling a portion of the market thereby
affecting the sales of that particular product. Substitutes in the automotive industries include
purchasers buying different models apart from Toyota or even choosing to take public means of
transport (Molnár, 2009).
Threat of New Entrance
High competition in an industry is an encouragement towards other companies joining it.
When there are many companies joining the industry, they exert some pressure on the prices and
to some extent divide the attention of customers towards a certain commodity that existed before.
This therefore subjects the existing companies to fight for customers’ attention at the same time
maintaining fair prices for the sake of the profitability of the company. If customers are loyal to
a given product of a given customer, there is the feeling of security even when other companies
are joining the industry. Automobile industry in the UAE has a less threat of new entrance as it is
costly to start and maintain.
Conclusion
It is vivid that the five factors of the porters five model are necessary to consider for the
success of any company in any industry. It is also clear that a company cannot avoid the impacts
of another factor in the model by dealing with one of them. The impacts of the five elements that
is the consumer power, supplier power, new entrance, competition and the power of substitute
products should be carried with equal weight. This is because they have an impact on the
profitability of a company through price control, their reputation and are a determinant of overall
success of that particular company in a given industry. The automobile industry in the UAE is
however lucky as the impacts of the five factors rarely hit on the prices and customer loyalty.
Porters Five Analysis Of The Automobile Industry In The UAE 6
References
Crook, T. R., & Combs, J. G. (2007). Sources and consequences of bargaining power in supply
chains. Journal of Operations Management, 25(2), 546-555.
Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic
Change, 15(5), 213-229.
Molnár, E. (2009). Strategic Management in the Ailing Automobile Industry.
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