PESTLE, SWOT and 5 Forces Analysis of Automobile Industry

This article provides an in-depth analysis of the PESTLE, SWOT and 5 forces analysis strategy development tools and their application in the automobile industry. It includes a detailed explanation of the political, economic, social, technological, legal and environmental factors impacting the industry. The article also provides a SWOT analysis and a Five Forces analysis of the industry.

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Assessment one

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Contents
Introduction.................................................................................................................................................3
Pestle analysis of Automobile industry........................................................................................................3
 Political factors................................................................................................................................3
 Economical......................................................................................................................................3
 Socio Cultural factor........................................................................................................................3
 Technological Factors......................................................................................................................4
 Environmental or Ecological factors................................................................................................4
 Legal Factors:...................................................................................................................................4
SWOT Analysis of Automobile industry...................................................................................................4
Strengths:................................................................................................................................................4
Weaknesses:............................................................................................................................................5
Opportunities:.........................................................................................................................................5
Threats:...................................................................................................................................................5
Five Forces (5F) Analysis of Automobile industry........................................................................................5
Threat of New Entrants...........................................................................................................................6
Bargaining Power of suppliers.................................................................................................................6
Bargaining Power of Buyers.....................................................................................................................6
Threat of Substitutes...............................................................................................................................6
Threat of Competition.............................................................................................................................6
Conclusion...................................................................................................................................................7
References...................................................................................................................................................8

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Introduction
The performance of business organizations are largely influenced by the rapidly changing
environment factors that are beyond their control. The present essay is undertaken for providing
an understanding of the PESTEL, SWOT and 5 forces analysis strategy development tools. This
is done by analyzing the internal and external environment factors impacting the automobile
industry by the application of the use of these strategy development tools.
Pestle analysis of Automobile industry
PESTLE refers to an analytical tool used in the strategic business planning and it provides
the strategic framework for understanding the impact of the external factors on a business. The
PESTLE stands for political, economic, social, technological, legal and environmental. All these
represent the external factors that impact the business in various manners. Pestle analysis can be
used in business in form of marketing planning, strategic planning, product development, project
expansion, organizational change and in other related business context (Kachru, 2009). In this
context, the in-depth explanation of the pestle analysis as a strategy development tool is provided
with its application in the automobile industry. The automobile industry is regarded as one of the
biggest industry incorporating wide number of brands competing with each other for the market
share. The pestle analysis of the automobile industry is carried out as follows:
 Political factors: Political factors have a direct impact on the growth and long-term
development of the automobile industry. The governments at a global level have strict
regulations regarding the low emissions vehicles and have higher taxation on luxury
vehicles. Government of UK and EU are providing subsidies to the automobile
manufacturers to produce low emission vehicles.
 Economical: Economic factors play an important role in the context of the automobile
industry. There are major changes in the automobile industry due to economic crises in
year 2008 and 2009. The increases in the cost of goods have led the increase in prices and
it has adversely impacted the sales volume of luxury cars all over the world.
 Socio Cultural factor: The changes in the preferences, needs, desire, and cultural
trends of the people around the world has led to shift in technology and has forced the

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automobile company to invest more in the research and development area. It has lead to
increase in overall cost of vehicles and in turn there is large reduction in sales volume of
vehicles.
 Technological Factors: The rapid change in technology and innovation determine
the market share of the automobile companies. The automobile companies continually
need to adopt the use of recent technology tools and devices for surviving in the highly
competitive automobile market and ensuring their long-term growth and development
(Kachru, 2009)
 Environmental or Ecological factors: There are strict laws for green technology
and it is mandatory for all automobiles companies to produce the low emission vehicles
to protect the environment from degradation.
 Legal Factors: It is important for the companies in automobile industry to follow the
rules and regulation of the domestic country and also give proper consideration to the
laws and rule in another country where they operate.
SWOT Analysis of Automobile industry
It is a strategic planning technique used to identify the strengths, weakness, opportunities
and threats faced by an industry. This enables in identification of the strategic competitive
advantage and the weaknesses that need to be overcome. The SWOT analysis of the automobile
industry is carried out as follows:
Strengths:
 Growth Potential: The automobile industry is regarded to be an evolving industry as
automobiles are ever in demand in the market to travel from one place to other. The
industry realizes higher profits from the American & European markets but the growing
need of its products in Asian market will further lead to its high growth and
development. Therefore, the industry is expected to grow and expand in the future
context also. Technology Advancement: The development of e-vehicles and bio-fuels will further
support the growth and development of the industry. The automobile companies around
the world are also emphasizing in development of renewable sources of energy such as

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solar wind for meeting their fuel demands. This will help in lowering down their
operational expenses and also ensures environment protection. Increasing Demand of Luxury Commercial vehicles: There is also high demand of
luxury commercial vehicles among the customers for travelling from one place to
another in the developing countries also. This is causing the growth of automobile
companies in these countries such as Volvo and Benz (Dyck and Neubert, 2008).
Weaknesses:
 Technical Failure: There have been large cases of the recalling of automobile products
such as cars due to technical dysfunction. In addition to this, the non-compliance with the
government rules has also caused recalling of large number of automobile vehicles
Opportunities:
 Development of Fuel-Efficient Vehicles: The automobile industry is emphasizing on
development of such automobiles that consumes less fuel and are energy efficient. The
development of such vehicles will further support its growth.
 Changing Lifestyle: The changing lifestyle of the consumers around the world is further
stimulating the demand of automobile vehicles such as need of easy transport from one
place to other (Keller, 2014).
Threats:
 Increasing Competition: The presence of large number of automobile companies is
intensifying the competition within the global automobile industry.
 Volatility in Fuel Prices: There is uncertainty regarding the fuel prices in the market due
to changing government regulations across the world. As such, the changes in the fuel
prices are a determining factor for the future growth of the automobile industry.
 High Investment in R&D: The automobile industry is incurring high investment in R&D
activities and this can impact their future profitability and growth (Kauerhof, 2017).
Five Forces (5F) Analysis of Automobile industry
The porter five forces model is developed to provide an insight into the various internal
and external environmental factors that impacts the growth and development of an industry. The
analysis of automobile industry by use of this model is described as follows:

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Threat of New Entrants
The high investment required for entering in the automobile industry reduces the threat of
new entrants. In addition to this, the presence of large competition among the existing companies
that have dominated the industry further increases the barrier to entry for new entrants.
Bargaining Power of suppliers
The bargaining power of suppliers is weak due to presence of large number of suppliers
providing automotive products and services. Therefore, suppliers carry out their roles as per the
industry standards as automobile companies have large number of options to switch from one
supplier to another.
Bargaining Power of Buyers
This is moderately strong in the automobile industry. This is because buyers are in
position to bargain for lower prices as they have large number of options for switching from one
to another brand (Dyck and Neubert, 2008).
Threat of Substitutes
There is presence of different type of substitutes as an alternative mode for transportation
to automobile such as air and ship travel. However, the increasing process and lower
accessibility decreases their threat to the growth of the automobile industry. The automobile
vehicle are readily available and also are economical means of transport and therefore largely
used by people across the world.
Threat of Competition
The presence of high rivalry between the automobile companies increases the threat of
competition. The brands are competing on the basis of price, design, quality, technology, safety
and other points (Steidle, 2016).

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(Source: http://www.enaction.info/porters-five-forces-model-ppt/porters-five-forces-model-ppt-
tips-to-visualise-porter-analysis-model-on-powerpoint-ideas/)
Conclusion
The businesses are adopting the use of strategic development tools for examining the
internal and environment factors that can have an impact on the business performance. In this
context, the pestle, swot and five force analyses are the main strategy development tools that can
be used for gaining an understanding of the external and internal environment factors impacting
the potential growth and development of an industry.

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References
Dyck, M., and Neubert, M. 2008. Management: Current Practices and New Directions. Cengage
Learning.
Kachru, U. 2009. Strategic Management: Concepts and Cases. Excel Books.
Kauerhof, A. 2017. Strategies for Autonomous, Connected and Smart Mobility in the Automotive
Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc.. GRIN Verlag.
Keller, M. 2014. BMW: Entering the Automobile Market in Brazil: Critical Analysis and
Evaluation of the Automobile Market in Brazil. GRIN Verlag.
Steidle, F. 2016. Analysis of the Automobile Industry in Times of Transition Using Porter’s Five
Forces Model. GRIN Verlag.