Banking Industry Porters Model

The Porter Five Forces analysis model first appeared in a Harvard Business School
professor Michael E Porter published in Harvard Business Review in 1979. The publication of
this paper has historically changed the understanding of strategy among enterprises,
organizations, and even countries. It was named one of the ten most influential papers of
Harvard Business Review since its inception.
A Five Forces analysis can help companies assess industry attractiveness, how trends will
affect industry competition, which industries a company should compete in—and how
companies can position themselves for success.
Five Forces Analysis is a strategic tool designed to give a global overview, rather than a
detailed business analysis technique. It helps review the strengths of a market position,
based on five key forces. Thus, Five Forces works best when looking at an entire market
sector, rather than your own business and a few competitors.
The following is the Porter Five Forces Analysis for Automotive Industry :
1. Barriers to Entry
It is difficult for new brands to enter the automobile industry which is because of the
large investment required for establishing a car brand. At the initial stage, a huge
investment will be required to set up the manufacturing facilities, distribution
network and for hiring 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 significant market share are low. Brand
image and reputation can also be major challenges before new players. Any new
brand would have to focus a lot upon engineering and product quality. Getting
access to raw material can be easy but then achieving economies of scale is difficult
for small players. Penetrating new markets is not an easy task.

2. Threat of Substitutes
There are several substitutes and alternative modes of transportation including taxis,
buses, trains and planes. However, none of them can provide the kind of accessibility
and convenience that owning an automobile does. While deciding the accessibility
of substitutes you ought to likewise think about time, cash, individual inclination and
accommodation in the auto travel industry. At that point choose if one vehicle
producer represents a major danger as a substitute.
Because Your own car will serve you round the clock but if you missed a train or bus
you have to wait for another. However, in case of the alternative modes you do not
need to worry for maintenance. Still, owning a car is both a matter of convenience
and prestige for most. So, the threat of substitutes is weakened.
3. Competitive Rivalry
The automobile business is viewed as an oligopoly (An economic situation where
dealers are not many that the activities of any of them will really influence value)
which assists with limiting the impacts of cost-based rivalry. The number of
recognized and influential brands is low and the exit barriers very high. Any brand
trying to exit would have to bear large losses. The level of customer loyalty is high
and while the industry is large, it has matured. This intensifies the competition for
market share. However, different brands target different market segments but yet
they overlap. Brands compete on the basis of price, design, quality, technology,
customer safety and several other points. Overall, competition in the auto industry is
a strong force or rather very strong. Auto firms are investing aggressively in research
and development, digitalization as well as marketing and overall customer
experience to grow sales and customer base. Whether in the premium category or
the small car segment and SUVs, level of competitive rivalry among leading brands is
strong. With higher competition, brands are trying to maximize customer satisfaction
and competing to provide the best customer experience. They are also investing in
growing their sales and distribution network as well as focus on after sales service is
higher now.
4. Bargaining Power of Suppliers

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 according to the rules set by the car
brands. The vehicle brands like BMW, Ford, Toyota and VW 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.
5. Bargaining Power of Buyers

A large part 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 an alternative mode of transportation. The buyers
are price sensitive mostly and would switch to another brand that offers a better
product at lower price. However, none of the buyers whether big corporations or
individual small buyers poses a threat of backward integration. Based upon the
overall picture their bargaining power is moderately strong. Brands focus on building
customer loyalty through design, quality and by offering competitive prices.
Competition in the automobile industry has grown intense and changing consumer
trends have also led to growth in the bargaining power of customers.

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The Porter Five Forces analysis model first appeared in a Harvard Business School

4. Bargaining Power of Suppliers

5. Bargaining Power of Buyers

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