External environment analysis: Paccar Inc

Paccar Inc is an American manufacturing company involved in the production of trucks, both in medium and large trucks. It is also engaged in the production and distribution of various truck components, heavy equipment, automotive engines, as well as powertrain related parts among others.

The corporation is further involved within the Information Technology field as well as the provision of different financial services (Lane 1-2). The following is a company analysis of the external environment affecting Paccar Inc; Industry Environment – 5-forces Analysis

The Industry 5-forces Analysis defines the general industry that a business company operates. After a company completes this analysis, it can successfully develop strategies that would help it place itself strategically on top. Bargaining power of suppliers (high): A strong supplier can make an industry more competitive and decrease profit potential for the industry.

The suppliers who provide Paccar Inc with various raw materials and even labor that it uses in the course of producing heavy duty trucks, automotive engines and other equipment are powerful. This is because the different suppliers involved with the company are able to increase the prices of their supplies thereby making Paccar Inc pay more and consequently reducing the firm’s profitability level.

Bargaining power of buyers (high): A strong buyer can also make an industry more competitive and decrease profit potential for the industry. The buyers who buy different types of the heavy duty trucks and automotive engines and heavy equipment manufactured by Paccar Inc have a lot of bargaining power with the firm, simply because they are at the end of the distribution chain and the different products and machines are intended for them. If the buyers stall on buying some of the firm’s products, the firm will suffer losses, as such they are considered to be powerful (Lane 2).

Threats of substitute products: – Paccar Inc also faces threats of substitute products produced by some of its competitors such as Daimler AG, Navistar International Corporation and AB Volvo. The heavy duty trucks produced by these competitors can pose a threat to the profitability of the firm (Cannon 2). Rivalry among firms (high): Increased rivalry among firms that produce heavy duty trucks and automotive engines is significantly higher since all of the firms aspire to be the world leaders and expand their market share.

The key rivals of Paccar Inc are the Navistar International Corporation AB Volvo and Daimler AG (Pearson 2). Threat of new entrants (high): Paccar Inc also faces the threat of new entrants into the production of heavy duty trucks. Influential automobile companies like Toyota Motors Corporation and General Motors may decide in the future to venture into the sector, thereby posing competition threats to the company (Cannon 1-2). Competitor Environment

Primary competitors of Paccar Inc: within the production of heavy duty trucks are Daimler AG, the German multinational car and Truck Company, AB Volvo, the Swedish multinational Bus and Trucks Company and Navistar International Corporation, the American multinational Truck and Engines manufacturer (Cannon 1). The Background of Paccar Inc.’s Primary Competitors: Daimler AG was founded in 1883 in Germany but has undergone different developments, such as a merger with Benz-Cie in 1926, to form Daimler-Benz.

The Daimler-Benz Corporation later merged with Chrysler Corporation in 1998, though the merger that ended in 2007 and the company reverted back to Daimler AG. Daimler AG has been in the automotive global industry for over one century and is the 2nd biggest Truck and Engine manufacturer in the world and also, it enjoys substantial number of shares in a number of other automotive manufacturers (Jaillet 1).

AB Volvo was founded in 1927 in Sweden, and has since been a world leader in the manufacture and distribution of buses, trucks and equipment used in construction, as well as control of other Truck companies such as French Renault Motors (Pearson 1).

Navistar International Corporation was founded in 1902 in America and hitherto is a global leader in the production of diesel engines, commercial buses and heavy duty Trucks as well as mid-sized vehicles such as vans, SUVs and Pickup Trucks (Cannon 2). Business Level Strategies

Daimler AG’s business level strategies include; dynamic planning in order to increase its productivity, profitability and global Trucks and Buses market share. Consequently, Volvo AB business level strategies include; increasing the gross margin profits of the firm by 3% and to establish the needed commercial presence in Africa and Pacific-Asia markets. Navistar International Corporation business level strategies include; reducing losses incurred by its nonconformist engines and also, to improve the growth of its stocks (Jaillet 1). Key Success Factors

The key success factors in the heavy duty truck and engine industry include; the ability to make fuel efficient engine systems, lighter trucks and buses, which are more aerodynamic and durable. In comparison to Paccar Inc, the other three have not fared better in the recent years in terms of financial performance. In 2013 for instance, Paccar earned $17.12 billion in annual revenues, Volvo AB had a reduced profit of $84 million down from $134 million in 2012. Consequently, Navistar International suffered a net loss of $898 million while Daimler AG recorded $762 million in earnings.

The performance metrics that indicate how well these aforementioned truck, bus and engine automotive companies have performed in a given financial year involve the number of units they have produced and sold, their respective prices at which their trucks, buses and engine products were being sold, the profitability ratios and the annual turnover of the four automotive multinationals.

The varied performance of Paccar Inc, Daimler AG, Volvo AB and Navistar International Corporation could be due to a number of factors that might include; shares controlled by each of the companies, the different costs of production incurred by both companies in the manufacturing process of their trucks, engine systems and buses, and also, the degree of productivity, marketing strategies and sales turnover at any given period (Cannon 2).

All of the major trucks, buses and engine systems manufacturing multinational companies discussed in this paper have the objective of expanding their operations and increasing their market share in the global market, including the emerging markets and also, in the 3rd world markets in Asia and Africa. Paccar Inc, Daimler AG, Volvo AB and Navistar International Corporation are all seeking to improve their productivity, sales and profitability levels. These four, truck and bus multinational, companies also have different capabilities, strengths and weaknesses.

All of them are stronger in the production of fuel efficient engines and durable light trucks and commercial buses, giving them an edge over other smaller companies in the sector. Apart from Paccar Inc, the other three companies depict intense weakness of poor penetration in emerging markets and innovativeness in the production of trucks, buses and engine systems (Cannon 1-2).