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Porter's Five Forces Model Case Study. The research paper is an overview of the automotive industry in America which is further followed by an analysis of the industrys structural characteristics, its profile and its impact on US economy with the

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Introduction

SUBMITTED BY STUDENT NAME American Automotive Industry in the light of Porter's Five Forces Model [Type the document subtitle] Submitted to ......... 2/20/2012 Abstract: The US automotive industry contributes a great deal in global economy. It is huge and a truly global industry; has gone through major wave of recession and is now in recent years showing gradual improvement. It has severely faced challenges of globalization, decreasing oil reserves resulting in high fuel costs, changes in buyer's demand and diminishing buying potential along with threats from direct competitions especially from Asian manufacturers who are enjoying low production cost. The research paper is an overview of the automotive industry in America which is further followed by an analysis of the industry's structural characteristics, its profile and its impact on US economy with the behavior it is expected to show in 2012. This will provide an understanding of the U.S. automotive industry as a whole in its current state. Along with this, an explanation of current industry model using Porter's five forces theory will also enable us in understanding the threats and opportunities currently encountered by American auto industry. This paper also includes brief on each major automotive player in the American automotive industry and lastly the success formula adopted by growing companies in the industry. a) Introduction: The American automobile industry has seen a lot of ups and downs, not only because of the major impact of recession but this down turn is also due to rapid technological enhancements, competitors with an advantage of comparatively low cost and cheap labor, increased awareness of global warming and ever-changing consumer demands and preferences. These are major challenges which may result in curtailing profits and decreasing higher shareholder's profit value. Although the industry is picking up now but still the current scenario looks way different than its prior booming years where the industry was well supported by government interventions, supply-base changes, and consumer driven adjustments affecting the complete value chain. ...read more.

Middle

An amount of USD 25 billion was provided to the big three in October 2008 to upgrade themselves and produce vehicles with a standard of at least 35 miles per US gallon. In order to be respected as a good corporate citizen with a priority on lessening carbon emissions, these companies started their research and development efforts and emphasized on introducing fuel efficient (hybrid and electronic) cars to the market. This initiative was welcomed by both environment enthusiasts and general public; although it should be noted here that majority of the vehicles produced by all the players in this industry are still oil based. 3) Industry Structure: Considering the period 2008 - 2009 only Ford has a positive differential with a tiny of 0.6%; (White paper, Grant Thornton, p.4, 2009) while GM and Chrysler have both lost market share to other competitors; losing their chunk of market share to manufacturers from Asian continent. The industry structure of 2008 - 2009 is given in Figure 5 in Appendix A. 4) Future Outlook as of 2012: As American auto industry is going through drastic changes, therefore as per forecasting performed by CSM worldwide (White paper, Grant thornton,p.6, 2009) , The local manufacturers are anticipated to reduce combined congregation capacity in North America by more than 11.5 million units, to 7.5 million units. Capacity of other auto manufacturers will increase by 20% showing an increase of 1.5 million. Volkswagen will increase their capacity by 100% reaching 1million units approx. same will be done by BMW. Whereas combined capacity of Toyota, Hyundai, Nissan and Honda will nearly reach 1.3 million units. The American automotive industry can only reclaim its former pride by adopting the same market strategy and offer fuel efficient / environment friendly vehicles to buyers that are affordable and durable. The emphasis on muscle (powerful engines) is a failed strategy and can only be offered to niche demography in these hard economic times. ...read more.

Conclusion

2.8% 2004 64,496,220 6.3% 2005 66,482,439 3.1% 2006 69,222,975 4.1% 2007 73,266,061 5.8% 2008 70,520,493 -3.7% 2009 61,791,868 -12.4% 2010 77,857,705 26.0% Reference: "Production Statistics". OICA. Retrieved 2011-04-07. Figure 2 : Motor vehicle production (units) - 2010 Motor vehicle production (units) - 2010 Country Units Produced China 18,264,667 Japan 9,605,985 United States 7,761,443 Germany 5,905,985 South Korea 4,271,941 Brazil 3,648,358 India 3,536,783 Spain 2,387,900 Mexico 2,345,124 France 2,227,742 Canada 2,071,026 Thailand 1,644,513 Iran 1,599,454 Russia 1,403,244 UK 1,393,463 Turkey 1,097,554 Czech Rep. 1,076,385 Poland 869,736 Italy 857,359 Reference: "Production Statistics". OICA. Retrieved 2011-04-07. Figure 3: Employment statistics Employment (all employees, in thousands) Jan. 2012 Motor vehicles and parts manufacturing 746.3 Motor vehicle and parts dealers 1713.4 Automobile dealers 1078.7 Reference: Bureau of Labor Statistics (2012), Automotive Industry: Employment, Earnings, and Hours Figure 4: Automotive government funding $ billions Purpose $19.4 GM Pre-filing 30.0 GM DIP Financing 6.3 Chrysler Pre-filing (includes Chrysler Financial) 6.9 Chrysler Exit Financing 12.5 GMAC 25.0 Advanced Technology Vehicle Mfg. Program (ATVM) 5.0 Auto Suppliers Support Program (A/R Guarantee) 5.0 Car Allowance Rebate System "Cash for Clunkers" (Estimate if extended beyond 11/09) 4.9 Term Asset-Backed Securities Loan Facility (TALF) (as of May 31, 2009) 0.4 GM Backstop Car Warranty 0.3 Chrysler Backstop Car Warranty (Est.) 25.0 Potential Additional ATVM $140.7 Total Government Support *in Billions (USD) IATVM Note: $8B of available $25B (32%) ATVM loan committed to three automakers (as of June 23, 2009). Figure 5: U.S. market share by OEM YTD 2008 YTD 2009 Difference Hyundai 5.3% 7.3% 2.0% Fuji Heavy 1.3% 1.9% 0.6% VW 2.4% 3.0% 0.6% Ford 15.5% 16% 0.6% Honda 10.8% 11.1% 0.3% BMW 2.1% 2.4% 0.3% Daimler 1.8% 2.0% 0.2% Renault/Nissan 7.1% 7.2% 0.1% Tata 0.3% 0.4% 0.1% Mazda 2.1% 2.1% 0.0% Isuzu 0.0% 0.0% 0.0% Mitsubishi 0.7% 0.6% 0.1% Suzuki 0.8% 0.5% 0.3% Toyota 16.8% 16% -0.8% GM 21.5% 19.7% -1.8% Chrysler 11.7% 9.8% -1.9% D3 48.6% 45.5% 3.1% A4 39.9% 41.7% 1.8% E3 6.3% 7.3% 1.0% Other 5.2% 5.4% 0.2% Total 100.0% 100.0% 0. ...read more.

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