Analysis of Automotive Industry and Porter's Five Forces Model

The assignment analyzes the automotive industry, highlighting intense price competition among existing brands and the use of advanced technology to gain customer retention. Market research is conducted to design car models in accordance with customer preference. The threat of substitute products is evaluated using Porter's Five Forces model, which suggests a low threat of substitutes in the industry.

THE GLOBAL BUSINESS
ENVIRONMENT-1

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1) Environment of the Global Auto mobile industry using PESTLE analysis...........................1
2) Global Auto-mobile industry using Porter’s Five Forces analysis.........................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The Global Business environment refers to the environment in different sovereign
countries. The environment includes the factors that effects the business at global level both in
internal and external terms. The Global environment influence the decision making of an
industry. Global business environment also includes market analysis. The project report is based
on Global Auto-mobile industry. As the Auto-mobile industry is growing rapidly after the car
production surges in Eastern Europe. The Global Auto-mobile industry is a multi billion industry
includes large competitive brands. The global auto-mobile industry has become important part
for global economy in order to generate revenue and provide employment. The purpose of this
project report is to find the factors and dimensions that effect global business environment of
Auto mobile industries. The project report will outline the Environment of the global Auto
mobile industry using Pestle analysis. The Project report will further explain the global auto-
mobile industry using Porter's five forces analysis. Lastly the report will provide a conclusion.
MAIN BODY
1) Environment of the Global Auto mobile industry using PESTLE analysis.
Pestle Analysis – The Pestle Analysis is a tool and framework that analysis the macro
environment factors that have impact on an Industry. The Harvard professor Francis Aguilar is
thought to be created a Pestle analysis in 1976 book. This tool is helpful in starting a new
business in foreign market. Pestle analysis consist of Political, Legal, Economic, Social,
Technological and Environmental factors.
Pestle Analysis of global Auto-mobile industry
 Political Factor – The Political factor includes government intervention around the
world which favours low emission vehicles. This directly impact the profitability of
Auto-mobile industry. The government taxes on luxurious vehicles are generally high.
There is government intervention on fuel prices which impacts the auto-mobile industry.
The government is supporting vehicles which are environment friendly. The taxes and
import rules are differentiated from country to country (Wach, 2015). The vehicles which
are low emissions receives tax subsides from the government. Political instability and
corruption is a barrier for auto-mobile industry at global level. There is barrier for new
entrants in automotive industries like government regulations and polices.
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 Economical Factor – Initially the auto-mobile industry is facing great recession but after
Slovakia has inaugurated an $890 million auto-mobile factory things have changed. The
sales of auto-mobile industries have generally higher in developing counties. Czech
republic has nearly double the Car production in 2010. This economic factor drives the
Auto-mobile industry. The developed markets has higher purchasing power of customers.
They spend more on luxurious vehicles. This leads to increase the sales of luxurious
vehicles in Auto-mobile industry. This lead to boost the sales of Auto-mobile industry.
Brands like Jaguar and land-rover has driving the auto-mobile industry. The demand of
luxurious vehicles of auto mobile industry have affected during poor economic
conditions and economic crisis (Davies, 2017). The most influence economic factor for
auto-mobile industry is purchasing power of the customers. It falls down during
economic downturns. The reputed and well- known auto-motive brands have lowering
the cost of cars and have tended to launch the low cost cars. The auto mobile industry is
playing vital role in growth of the economy. As the case study also evaluated that auto
mobile industry has provided Employment to the people. Slovakia event has provided the
employment up-to 3,500 people after opening the $890 million auto mobile factory.
 Social Factor – The market of auto-mobile industry is influence highly by socio culture
factors. The socio – culture is the basis of auto-mobile industry in order to define the
customer choice and preferences. The auto mobile industry manufactures the models of
vehicles in accordance with customer choice of design in their car model. The auto-
mobile designed their vehicles also by considering factor like age of the customers. If the
age group is young than the bikes and car will be designed considering the current
demand of youngsters. The style and preferences also differ country by country so the
auto-mobile industry need to do research on it (Subramanian, 2017). The auto-mobile
industry need to updated with the current market trends and customers outlook. The auto-
mobile industry used to manufacture the prestige and luxurious cars for upper class
people but now it becomes everyone's needs. As people are more tend to maintain
standards they afford luxurious Cars. This lead to increase the sale of luxurious Car in
auto-mobile industry at global level. People are becoming more health conscious in
United state and Europe so some people are using cycles for the way of transportation.
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Cycle is becoming an alternative product for the auto mobile industry so this might be a
threat too.
 Technological Factor – The technological factor is an important determinant of auto-
mobile industry in order to gain the market share. The more innovative and updated
technology the automotive company brings or introduce then it will gain more market
share. The major brand such as jaguar and Land-rover has continuously done research
and development in order to introduced advanced technology in their car models. This
leads their automotive company towards the profitability and increase their customer
satisfaction. Brands such as Toyota, is planning to release driver-less car in the upcoming
years (Porter and Kramer, 2019). The major technological players are also planning to
enter into the auto-mobile industry. Nowadays the customers focus is shifting moreover
into high mileage vehicles and fuel efficient vehicles. The sales of low emission vehicles
are generally high in auto-mobile industry. Thus, the technology is an important factor to
drive the auto-mobile industry.
 Environmental Factor – The laws related to environment friendliness and carbon
emissions is growing hardly for auto-mobile industry. The pollution testes are growing
stricter in modern cities all over the globe. The vehicles which passes in the pollution test
are only allowed in certain markets of EU and UK. This lead to increase the sale of
Environmental friendly car or low emission cars in Auto-mobile industry. Bridges and
roads affect use of auto mobiles because of these physical infrastructures quality (Esmer
and Duru, 2017). Good conditions of roads that is smooth roads leads to positive affects
on use of auto mobiles. The low emissions and fuel consumption vehicles are in trend as
they create less pollution. Government and law also shows favour for usage of these cars.
Environmental factors such as natural calamities (earthquake, drought, heavy rainfall,
snow fall etc.) can affect auto mobile industry. These factors distract the supply chain of
the auto mobile company.
 Legal Factor – Auto-mobile industry is affiliated with the safety laws. The passenger
safety laws are bounding the automotive industry at global level to make car which is
more safe for the driver. Environmental laws are also effecting the auto-mobile industry.
Pollution laws implements a lot in global auto mobile industry. As these laws are for
safeguarding the environment and promote various preventive measures to control
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pollution. Global auto mobile industry need to follow this law to avoid legal hazards.
Product safety laws are also followed by the industry of global auto mobile. This include
faulty airbags, corrosion in metals used in auto mobiles etc. The companies deals in this
industry need to deal with such faults and mistakes because this may leads to accidents
and loss of human and other resources as well. Taxation laws are also followed by these
industries of auto mobile (Koester, 2016.). The government levy tax on supply of auto
mobiles from one country to other. By this they face difficulty in dealing in different
countries market. Environmental laws include safeguarding environment by providing
low emission models in market. So, these global auto mobile industries deals along with
taken preventive measures of protecting environment by launching low emission fuel
models in market.
Conclusion of Pestle analysis – The conclusion is being made from the above Pestle analysis is
that the above factors are important in trillion dollar auto mobile industry. The Auto-mobile
industry is now more focused on making low emission vehicles by considering the
environmental factor. The auto-mobile industry is now making high mileage and low cost
vehicles after considering the culture factor. It is been concluded that even major players are
investing in research and development in order to introduce new technology in their car models.
Government is also supporting the lower emission vehicles this is an opportunity for auto-mobile
industry to introduce low emission vehicles in the market. The government safety laws is also the
biggest concern for auto-mobile industry as they are more conscious for the customer safety they
are launching safety cars models in the market.
2) Global Auto-mobile industry using Porter’s Five Forces analysis.
Porter's Five Forces
The Porter's five forces is a model that identifies five competitive forces that shapes
industries. Porter's five model helps to determine Strengths and weakness. It is a framework that
helps in analysing a Company's competitive environment. It is a business strategy developed by
Michael E. Porter in the year 1979. The Porters five forces model analysis the Corporate
Strategy. It can apply to any segment in order to search profitability. Porter's five forces consist
of Rivalry among existing competitors, Threats of new Entrants, Bargaining power of Buyers,
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Threats of substitute products and Bargaining power of suppliers. Porter's five model state that
collective strength of these forces determines the profit potential of an industry.
Five forces Analysis of Global Auto-mobile Industry
In the past great recession has hurt the Auto-mobile industry but now the Auto-mobile
industry is flourishing again. Recent inauguration for Slovakia was a major event of an $890
million auto-mobile factory. The Factory provide Employment up-to 3,500 people. In the year
2010 Czech republic nearly double the Car production. As a result the Car production surges in
Eastern Europe. The five forces analysis of auto-mobile industry which affect its competitiveness
and attractiveness of the market. The model will help the auto-mobile industry to keep track
record of competition and to take competitive advantage out of it. The auto-mobile industry is
now more focused on customer safety rather than just improving technology and design.
 Competitive Rivalry among existing players – There is intense competition in auto-
mobile industry. The Competition is high between Recognized and influential brands.
There is price competition among them. The customers preferences and choices are
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Illustration 1: Porter's Five Forces
Source: Five Forces Model, 2016

changed on timely basis in Auto mobile industry. For gaining the customer loyalty brands
needs to get updated with new technology and need to do research in order to analysis
customers demand in the market. The latest technology helps the automotive brands to
cut off the competition. The Brand take competitive advantage who has introduces new
technology and has launched the latest design models in accordance with customers
prefer-ability (Cook, 2017). The automotive companies are improving their product
quality for themselves in competitive rivalry. There is Competition among existing
brands for designing the best models that are more safety oriented for the customers. As
now customers are more safety concern, the automotive industries are designing and
manufacturing there auto-motives which defines customer safety.
 Threat of new entrants – There is difficult for new auto-mobile brands to enter into this
industry. There is high competition from the existing brands. Unless an until the New
brand doesn't introduce something innovative and differentiate products from the existing
brands. The chances of gaining market share is low for the new entrants. The brand
image and reputation of the existing brands is a major threat for New Entrants. The new
entrants have to focus more on product quality and engineering. The economics of scale
are difficult to achieve for the small players that are just newly enter into the market.
There is government intervention in auto-mobile industry (Kourula, Pisani and Kolk,
2017). The new entrants generally requires high investment. The New entrants face
difficulty to set manufacturing units and to manage the distribution network and the auto-
mobile manufacturers usually need to hire skilled staff for drag the company towards
profitability. This involves high investment.
 Bargaining power of buyers – Generally buyers are the small individual that buy single
vehicle only corporations buys vehicles in a bulk. This type of buyers are tended to buy at
the bargain price. The buyers who are price sensitive they general switch to other brands
who offers products in less price. The loss of Customer attrition is faced by the Auto-
mobile industries (Pisani and et.al., 2017). There is threat of backward integration for the
Auto-mobile industry. The Auto-mobile industry is more focused on building customer
loyalty and improving product quality and by offering competitive prices.
 Bargaining power of suppliers – Bargaining power of suppliers are weak who are small
players in auto-mobile industry. The bargaining power of suppliers depends upon the size
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of the auto-mobile industries. This is hard task to bargain for small companies in the
auto-mobile industry. The raw material is also easily available so switching from one
supplier to another one is not hard task for Auto-mobile industry.
 Threat of substitute products – There are lost of substitutes available for the mode of
transportation for the public like Taxis, Bus, Trains and air-planes. The threat is from
daily commuters they find public transport cheaper to afford. But this substitutes doesn't
serve convenience and prestige that automotive has (Zhao and Ferran, 2016.). The
personal vehicle can serve round the clock but people need to wait for Train and bus for
long hours once they got missed. The threat of substitute is weak for the auto mobile
industry. Cycle can be a substitute product for auto-mobile industry as people are more
health conscious in Europe and United states they are using cycle as a means of
transportation.
CONCLUSION
The conclusion is being made from the above project report is that the global auto-mobile
industry is growing rapidly. The Car product is surges in the Eastern Europe. Through Pestle
analysis it is been concluded that Automotive industry is more focused on making low emission
cars and vehicles by considering the environmental factor. The automotive industry is
introducing cars which are of high mileage. It is been concluded from the Porter's five forces that
there is barrier for new entrants in auto-mobile industry because there is already high
competition in the market from the existing brand. It is also been concluded that there is
competitive rivalry among the existing brands in auto-mobile industry. There is intense price
competition among the existing brands. The automotive companies are introducing advanced
technology for gaining customer retention. By doing market research they design their car
models in accordance with customer preference. It is also been concluded from Porter's five
forces model that there is less threat of substitute to automotive industry.
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REFERENCES
Books and Journal
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Holt, S., Marques, J., Hu, J. and Wood, A., 2017. Cultivating empathy: New perspectives on
educating business leaders. The Journal of Values-Based Leadership. 10(1). p.3.
Koester, E., 2016. Green entrepreneur handbook: the guide to building and growing a green and
clean business. CRC Press.
Kourula, A., Pisani, N. and Kolk, A., 2017. Corporate sustainability and inclusive development:
highlights from international business and management research. Current Opinion in
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oriented business interactions in a cloud manufacturing environment. Journal of
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Porter, M.E. and Kramer, M.R., 2019. Creating shared value. In Managing sustainable business
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Wach, K., 2015. Entrepreneurial orientation and business internationalisation process: The
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Zhao, J. and Ferran, C., 2016. Business school accreditation in the changing global marketplace:
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