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    Porter's Five Forces Analysis For Indian Automotive Industry

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    Aditya Jain
    This document analyzes Porter's Five Forces for the Indian automotive industry. It finds that: 1) The bargaining power of buyers is high due to many options from different manufacturers and low switching costs. 2) The bargaining power of suppliers is average as there are many suppliers but automakers rely heavily on some and switching is difficult. 3) Rivalry among existing competitors is high due to many domestic and foreign options, price wars, and decreasing brand loyalty. 4) The threat of substitutes is moderate as public transport is underdeveloped in many cities despite government support, and highways account for most passenger travel. 5) The threat of new entrants is moderate as large investments

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    Porter's Five Forces Analysis For Indian Automotive Industry

    Uploaded by

    Aditya Jain
    332 views3 pages
    This document analyzes Porter's Five Forces for the Indian automotive industry. It finds that: 1) The bargaining power of buyers is high due to many options from different manufacturers and low switching costs. 2) The bargaining power of suppliers is average as there are many suppliers but automakers rely heavily on some and switching is difficult. 3) Rivalry among existing competitors is high due to many domestic and foreign options, price wars, and decreasing brand loyalty. 4) The threat of substitutes is moderate as public transport is underdeveloped in many cities despite government support, and highways account for most passenger travel. 5) The threat of new entrants is moderate as large investments

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    porter analysis of auto industry

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    Automotive_PorterAnalysis

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    This document analyzes Porter's Five Forces for the Indian automotive industry. It finds that: 1) The bargaining power of buyers is high due to many options from different manufacturers and low switching costs. 2) The bargaining power of suppliers is average as there are many suppliers but automakers rely heavily on some and switching is difficult. 3) Rivalry among existing competitors is high due to many domestic and foreign options, price wars, and decreasing brand loyalty. 4) The threat of substitutes is moderate as public transport is underdeveloped in many cities despite government support, and highways account for most passenger travel. 5) The threat of new entrants is moderate as large investments

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    332 views3 pages

    Porter's Five Forces Analysis For Indian Automotive Industry

    Uploaded by

    Aditya Jain
    This document analyzes Porter's Five Forces for the Indian automotive industry. It finds that: 1) The bargaining power of buyers is high due to many options from different manufacturers and low switching costs. 2) The bargaining power of suppliers is average as there are many suppliers but automakers rely heavily on some and switching is difficult. 3) Rivalry among existing competitors is high due to many domestic and foreign options, price wars, and decreasing brand loyalty. 4) The threat of substitutes is moderate as public transport is underdeveloped in many cities despite government support, and highways account for most passenger travel. 5) The threat of new entrants is moderate as large investments

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Porter’s Five Forces Analysis for Indian Automotive Industry

    Bargaining Power of Buyers :

    • The capacity of independent clients to bargain rates that benefit the supplier is
    referred to as buyer power. Motor vehicles are mostly purchased by private persons,
    businesses, and governments.
    • Customers in a market like India have a lot of negotiating power because there are a
    lot of items in the same category from various producers.
    • Customers, with rare exclusions, have the ability to turn away from a deal they don't
    want and move it to another dealer of the same brand or to another manufacturer
    or platform.
    • Individual customers have some price impact inside a dealership, but they have
    minimal control over producers.
    • Switching costs are low as customers may quickly and inexpensively move to other
    car dealerships.
    • Hence, bargaining power of buyers is quite high in the Indian Automotive Industry
    Bargaining Power of Suppliers :

    • The abundance of current prospective suppliers in this market reduces supplier


    power
    • But switching costs are substantial since developing part designs and specifications
    involves a significant initial investment.
    • Also, these suppliers are unlikely to merge in the future. Labour, components, raw
    materials, and services are all needed by automakers. The price of these
    components can have a big impact on profit margins.
    • If a manufacturer is reliant on one supplier almost exclusively, this creates a
    monopolistic situation that requires that the manufacturer keep the supplier
    satisfied.
    • On the flip side, the bulk of suppliers’ products are purchased from one or two
    automakers. Switching suppliers by an automaker might be disastrous for the former
    supplier's business.
    • Overall the bargaining power of suppliers is average, i.e., not too high and not too
    low.

    Rivalry among Existing Competitors:

    • After liberalisation, there has been a significant growth in competitive competition


    since the introduction of international manufacturers such as Volkswagen and Ford
    into the low-cost hatchback sector, the rivalry has intensified.
    • Foreign manufacturers have exacerbated the rivalry by altering their traditional
    designs to meet Indian requirements.
    • Various firms provide various incentives to entice clients to purchase their own
    automobiles. Price wars are becoming common.
    • The number of rivals in the Indian automobile industry has increased dramatically
    over the previous decade, and many more are projected to join in the coming years.
    • At present the Indian customer has more than 20 domestic and foreign players
    offering 120+ locally manufactured models.
    • With decreasing brand loyalty, increasing number of alternatives and low switching
    costs we can say that the Rivalry among existing competitors is quite high in the
    Indian Automotive Industry.

    Threat of Substitutes Products:

    • A vehicle manufacturer must consider not just the possibility of a possible customer
    purchasing a different brand of automobile, but also the possibility of a potential
    consumer travelling to their location using alternate means of transportation such as
    bus, rail, or aircraft.
    • Rail and air transport account for 10% of all passenger travel, whereas highways
    account for 90% of total passenger traffic.
    • Government policies has been supporting the use of public transport, increasing fuel
    prices have been pushing some urban drivers to use public transportation
    • But, the public transport is still underdeveloped in most of the cities
    • Hence, we can say that the threat of substitute is moderate in the Indian Automotive
    Industry.

    Threat of New Entrants :

    • Because setting up production facilities and a distribution network demands a large


    financial commitment, only a few new firms or entrepreneurs are capable of
    entering the automobile business.
    • Established multi-national large rivals benefit from economies of size and scope,
    making it extremely difficult for a new entry to compete on price.
    • It takes a long time for a newcomer to establish a strong enough reputation to
    compete.
    • But the advent of foreign rivals with the necessary finance, technology, and
    managerial skills began to erode several automotive firms' market dominance.
    Foreign automakers are finding it simpler to penetrate the Indian domestic market.
    • Currently the Government of India allows 100% FDI in the automotive industry.
    • Hence we can say that the threat of new entrants is quite moderate in the Indian
    Automotive Industry.

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