The world population will increase another 3 billion to 9 billion in 2044 (Figure 1), with the imbalance growing between population numbers and vital life sustaining resources, humans must actively conserve cropland, freshwater, energy, and biological resources. Humans need to develop renewable energy resources to reduce the damages of earth resources and diminishes of human being. The World Health Organization says that about 2 million people die prematurely every year due to air pollution globally. There were estimated that over 600,000,000 passenger cars in the world today (http://www. worldometers.
info/cars/), and the major pollution come from the air pollution which released out from the vehicles. “In urban areas, harmful automotive emissions are responsible for anywhere between 50 and 90 percent of air pollution. ” (Meghan E. Smith) This brings to a concern to all automotive industry to change their business concept and designing green car. The trend in automotive markets target on the environmentally-friendly vehicles. All consumers are eager to get the latest green car to flaunt their green behavior and possessions because there are now millions of other consumers who are actually impressed by green lifestyles.
More and more people around the world are turning to the possibilities offered by the developments towards more environmentally-friendly vehicles. Car manufacturers are investing a lot on research and development in order to build the best environmentally-friendly vehicles which will attract the consumer attentions. It means building environmentally-conscious vehicles that do not sacrifice both aesthetics and costs in order to reduce fuel emissions. Now the trend in automotive market, all Generation Y consumers are looking at electric cars, hybrids and clean diesels car.
They willing to embrace new brands and new technology which can be environmental friendly yet it does not compromise to the size and performance of the car. Generation Y will define the automotive market. Therefore, car manufacturers need to design and build car which suit to the market demand. Porter’s Five Forces The Porter’s Five Forces analysis is designed to evaluate the competitive forces in the industry the firm operates. It helps in analysis the competitors and the threats in the market.
The Porter analysis examines three horizontal forces, or competition in the same industry: Threat of new entrants, threat of substitute products and threat of established rivals. Two forces are from vertical competition, or those from the supply-chain: Bargaining power of customers and bargaining power of suppliers. The threat of the entry of new competitors – The entry of new competitors will bring down the price of the car, as the consumer has more choices. Unfortunately, the barrier for new competitors will be the economic of scale.
Furthermore, large capital investment needed to set up a manufacture plant or on research and development. Different brands of car manufacturer are trying focus on the green car as their focus products, which make the market more competitive. China is looking into designing green car, they are researching on how to reduce CO2 emission out from the dirty coal. (Eric Loveday) As China is part of the biggest population and manufacturer country, it will be a big threat to all existent car manufacturers as China gain the Economic of Scale.
Even with the large economic of scale, the new firms must sustain themselves in the competitive market around the world. The threat of substitute products or services – Substitute of car could be public transport (e. g. bus and train). Nowadays, all rails are generated by electric unlike burning of woods to generate the motor during the old days. The automotive markets are very competitive as different brands of car manufacturer are designing the car with a close range specification to compete with one another (e. g. design, price, technology, power, fuel efficient, weight etc).
A change in the price of a complementary product (e. g. , gasoline, batteries, and tires) could have a significant impact on the demand for automobiles. Recently, manufacturers are building interior components using recycle products (Example). As the gas price are increasing, consumer main concern when choosing the car is the vehicle composition. Recently, all car manufacturers are building electric car which is generated by batteries. Even with sufficient of lithium-ion batteries in the market (Eric Loveday) (Figure 2), the price of the batteries will increase when everyone are replacing gas with battery.
In UK, some car rental company offer short-term rentals of car within communities and between neighbours. In this way, it allows the consumer to be both Eco-aware as well as budget savvy (collaborative-consumption-car-sharing) With high technology and recession, people tend to travel less. Most meeting, discussions or lesson are held online, this will decrease the demand of car and traveling. The bargaining power of customers (buyers) – Consumers will have the bargaining power over the dealer as the price is very competitive over different brands and models with close range of specification.
Consumer can easily switch dealers within the market, depends on their preference of models and budgets. In additional, all consumers can access via internet for the product details comparison (e. g. specifications and price). Overall, consumer will only have bargaining power over the dealers but not the manufacturers. Therefore, it poses a weak effect to the industry profit. As the price of petroleum keep increasing, above USD$100 per barrel (Figure 3). All consumers are more interested in green car which have better fuel efficiency.
Consumer will select car with the best fuel efficiency yet does not compromise with the specification of the car. Other than focus mainly on environmentally friendly car, consumers need to consider the best deal on price, finance repayments, road fund license and car insurance, as well as available fuel options. The bargaining power of suppliers – Auto manufacturers require inputs-labor, parts, raw materials and services. All these cost will affect the profit margin. Nowadays, not only they are many brands around the world. There are many suppliers and manufacturing plant around the world.
All car manufacturers are outsourcing their plants to other countries which have lower production cost or nearer to their suppliers (e. g. Toyota manufacturing plant at Thailand). China had opened their markets in car manufacturing, with their economic of scales and low production cost. China car manufacturer will definitely bring down the cost of the cars. The intensity of competitive rivalry – With the rise of foreign competitors like Toyota, Honda and Nissan, rivalry in the American auto industry has become much more intense. Firms compete on both price and non-price dimensions.
All the companies make cars, trucks or SUVs. The competitors are compared to one another constantly (Top 10 Green Cars of 2011), most latest products will be show cast in those international automotive road shows or events. In conclusion, the global trends in automotive markets are moving toward the eco-friendly vehicle. All the manufacturers focus their business strategy and concepts to the green industry. With the porter’s five forces analyses, manufacturers are able to identify the threats and design strategies to gain more market share.
Gain Attention Forcus on how to improve or rather than reduce Adopt the right strategy Recession – spend huge capital on r n D to compete and design the most eco-friendly car Appendix Figure 1 – International Data Base World Population: 1950-2050 http://www. census. gov/population/international/data/idb/worldpopgraph. php [pic] Figure 2 – Study: Researchers at Ford, U of M say enough lithium exists to power electric vehicles til 2100 http://green. autoblog. com/2011/08/09/researchers-at-ford-u-of-m-say-enough-lithium-exists-to-power-e/
Figure 3 – Brent_Spot_monthly. svg http://en. wikipedia. org/wiki/File:Brent_Spot_monthly. svg [pic] Reference Meghan E. Smith http://auto. howstuffworks. com/percentage-of-air-pollution-due-to-cars. htm#mkcpgn=kaw1 Top 10 Green Cars of 2011 by Kelley Blue Book http://www. hybrid. com/hybrid-car-news/item/276-top-10-green-cars-of-2011-by-kelley-blue-book Eric Loveday Study: Electric vehicles are way too dirty in China http://green. autoblog. com/2011/08/02/electric-vehicles-are-way-too-dirty-in-china/ collaborative-consumption-car-sharing
http://www. trendspotting. com. au/2011/05/25/eco-trend-2011-collaborative-consumption-car-sharing Five Forces of Competition http://www. carfreaks. info/general-motors-strategy-porters-five-forces http://dinarstandard. com/leadership/strategy-concepts-porters-five-forces-of-competition/ http://www. worldometers. info/ http://www. planetark. com/dailynewsstory. cfm/newsid/37037/story. htm How to make the car more power yet eco friendly – eg of sports or luxury car Promoting thru Motor Show Green Automobil 2011 Expo