2. Describe the industry and explain why you have chosen that one (Porter’s five forces).
The automotive industry is a big term; indeed it is used to describe a large range of companies and organizations engaged in the development, design, manufacture, marketing, and selling of motor vehicles.
The automotive industry is one of the world’s most important economic sectors in terms of revenue. The automotive industry is one of the biggest industries in Slovakia with big manufacturers such as Volkswagen, PSA Peugeot- Citroën and Kia. Porter's Five Forces are used to examine the attractiveness of an industry. It is done by observing five forces which influence that industry. The five forces are;
1. The threat of new entrants 2. The bargaining power of customers 3. The threat of substitute products 4. The bargaining power suppliers have 5. The intensity of the competitive rivalry
1. The threat of new entrants:
This is generally a very low threat. Factors to examine for this threat include all barriers to entry such as upfront capital requirements, brand equity, legislation and government policy and the ability to distribute the product. A new entrant will also have to adapt he’s cars to the customers habits, e.g. bigger cars in the US than in Europe.
2. The bargaining power of customers:
There are so many cars to choose nowadays. The main factors that affect the customer’s choice to purchase a car or not are: * The appearance * Quality * Price * Environmental effect
Customers like to have the latest brand new looking car on the market. The quality of the car will be an important issue in the choice. The car has to be efficient, which means a safe and less consuming car. Due to all the competitors you find in the market, customers will be able to purchase a cheaper car at a good level of quality. Car manufacturers are also building environmental friendly cars; indeed, they have to take into consideration all the environmental problems we are having nowadays. A car will be purchased depending on the lifestyle of the buyer.
3. The threat of substitute products
There are very low substitute products, indeed apart from the second hand business where you are able to purchase older cars at lower prices than the new ones or a city/country with very good public transportation, bicycle lanes that would allow you to move in a different and cheaper way than our usual cars you will not find any other substitute.
4. The bargaining power suppliers have:
In the car industry this refers to all the suppliers of parts, tires, components, electronics, and even the assembly line workers. Suppliers usually have very low power, indeed, each manufacturer has many suppliers. Toyota has more than 10 different suppliers in the US which means car manufacturers do not rely at all on the suppliers but the suppliers rely on the manufacturers.
5. The intensity of the competitive rivalry
In most countries all carmakers are engaged in fierce competition. All major car-producing nations experience this intense rivalry. This obviously includes the US, Japan, Italy, France, the UK, Germany, China, India, and more. While a Porters five forces analysis applies to all companies competing in one same industry, what differs is that those firms' profitability will vary between them. This is because of their own competitive advantages and varying business models. So just because all firms in one industry and market are subject to the same forces doesn't mean they perform equally.
We should not forget that an analysis of Porters five forces will not be the same in all countries and same for the type of automotive industry, we understand by type whether if it’s the electric car industry or the conventional car industry.
4. Describe profile of successful business leader (or company) operating in this industry. Identify key elements of the strategy that lead her/him to success.
Car production in Slovakia
Production in Slovak production and assembly automotive plants rose 17.2% in 2010 in comparison with 2009. 95,601 cars more were produced. Just for comparison, data on cars produced in neighboring countries of the EU in 2010 are listed: * Czech Republic: 1,076,385
* Hungary: 167,890 * Poland: 869,376 * Austria: 104 * Ukraine: 83,133 The overall number of cars produced globally was 77,609,901 in 2010, which means a 25.8% rise in comparison with 2009. PSA Peugeot Citroën Slovakia Production capacity: 300,000 vehicles per year Production of 2010: 183,000 vehicles Production of 2009: 207,128 vehicles Export of 2010: 99% Established in: 2003 Vehicles: Peugeot 207, Citroen C3 Picasso Number of employees: 3,000
Plant of the PSA group is located in Trnava Kia Motors Slovakia Production capacity: 300,000 vehicles per year Production of 2010: 229,505 vehicles Production of 2009: 150,015 vehicles Export of 2010: 98% Established in: 2004 (first production plant of Kia vehicles in Europe) Vehicles: new Kia Sportage, Hyundai ix35, Kia cee’d Number of employees: 3,000
KIA plant is situated in Zilina together with motor production. The second engine shop KIA Motors is under construction. Volkswagen Slovakia Investments of 1991-2010: EUR 1.9 bill. Production capacity: 400,000 vehicles per year Production of 2010: 144,510 vehicles Production of 2009: 105,997 vehicles Export of 2010: 99% Established in: 1991 Vehicles: Volkswagen Touareg and Hybrid version, AUSI Q7 and Porsche Cayenne bodies, since the second half of 2011 New Small Family Cars VW Up! And VW Space Up! are produced in Bratislava’s plant. Number of employees: 7,000
Volkswagen plant are situated in the following localities: Bratislava (assembly plant), Martin (production plant of components and parts) and Kosice (preparation of VW vehicles for the Russian market)
Those implementations are strategic for the groups because this geographic zone has become one of the strongest global concentrations of the automotive industry. This is how Slovakia is the largest producer of cars per capita.