Consumer Power Of Buyers On Automotive Industry

Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.

A threat of substitutes exists when a products demand is affecting by a price change in a substitute product. For example, Burger King taking the place of Chipotle in the market. In the Porter model, the threat of substitutes usually impacts an industry through price competition. This happens primarily because Burger King or any other food joint can offer better prices i.e. lower prices of products than Chipotle. Even though, both food joints largely deal with very different products, there is always a threat that a substitution can take place if one food joint stays out of the market space a long time. Also, if you look at the industry as a whole, people do not specifically choose to have tacos over burgers, it essentially comes down to which fast food joint will be less heavy on the consumer’s

Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.

The bargaining power of buyers stands in a direct relationship with the bargaining power of suppliers. If the bargaining power of buyers is substantial it increases the opportunity cost of suppliers. The greater the buyers concentration the greater their bargaining power. This bargaining power is also increased in markets where the suppliers’ concentration is high. The bargaining power is also increased when the cost of switching from one supplier to another is low. In instances where backward vertical integration is possible i.e. buyers setting up their own chains of suppliers the bargaining power of the buyer increases in that their prices may become more competitive. In a market where the buyers are more concerned over quality than price their bargaining power decreases as they are less inclined to shop

In porter’s theory, substitutes refer to products in other industries, not different types of the product. A substitute exists when a products demand is affected by a change in the price of the substitute product.

The threat of substitutes for the Household Products of the Nondurables Industry is high. As mentioned before, each company produces a product that is very similar to its competitors. Customers also have high bargaining power in that they can buy substitute products such as paper towels and disinfecting sprays. If a company does not spend time and effort marketing its products, consumers will not be able to differentiate them from a competitor.

Although, we know that there are other alternative transportation such as Air, Bus, Train and etc. For example, Air, by using airplane to the destination that people desire by saving more time or even Train such as bullet train that had been used in Japan, from place to place, such as from round trip from Tokyo to Hokkaido is less expensive when compare to the same trip by a fuel consumed Toyota Prius (Donald et al., 2005).

Substitutes not only limit profits in normal times but also reduce the bonanza an industry can reap in boom times which is no good for any business in any industry.

This deals with the threat of substitute products. The threat of substitutes can render unique resources obsolete, as was the case in the steel industry when aluminum manufacturers stole the market share for beverage cans.

Suppliers exercise average force on Ford Motor Company. The affect of its suppliers and their peremptory requests on companies are looked at in the Five Forces analysis. The following outside elements add to the average bargaining power of suppliers.

In this paper, I will be addressing a big topic in the automotive retail today. This topic is should car manufactures be able to sell directly to consumers. In this paper I also answer questions like why would a manufacturer want to sell directly to consumer and the potential causes if they were allowed to sell directly to consumers. I also state why this topic is important to me.

A thorough analysis of the external forces that shaped the global automotive industry in 2009 reveals how the rivalry between established car makers set the stage for some to successfully survive the global recession while others were forced to seek Chapter 11 bankruptcy. A closer consideration of the impact of consolidation, demand and supply, fixed costs, product differentiation, and exit barriers on rivalry within the industry reveals how new entrants and weaker competitors were able to take advantage of environmental opportunities during the recession and gain profit shares. These considerations illustrate the critical importance of analyzing the forces that shape competition in an industry and how such an analysis serves as the

Bargaining Power of Suppliers-Strong. Suppliers are relied upon to provide the company with competitive pricing, however, you can’t trade quality for low prices and this puts BMW in a difficult position. They have built relationships with their suppliers over the years and they will lose their competitive advantage in this area by expecting suppliers to cut prices to get higher profits.

because retail customers are amateur purchasers who spend their own money for non-routine consumption. Thus, they seek to gain ‘experiential’ or ‘symbolic’ (Keller, 1993) benefits from the car brand instead. This demonstrates that there exist differences in specificity among individual customers. Specificity may depend largely on how buyers discriminate, between ‘essential’ and ‘special need’ (Oliver, 1997: 54) in importance: in other words needs and wants. If some buyers regard importance as meaning essential, then all requisite features of the cars, such as maximum speed, acceleration rate, horse power, and engine size become very important. On the other hand, if buyers perceive importance as a special need, then some features may not be anticipated. For example, if the luxury car buyer is only interested in the country-of-origin of the brand (German in this case), then the technical characteristics will be unimportant. When customers seek to purchase a product, they pay attention to whether the product will satisfy basic needs and desires in their lives. Here, the fleet-car customers have the basic needs (to choose a cost-effective car), and desires (to possess a luxury car). The most reasonable choice is Lexus GS300 SE. However, most retail customers have a more preferable attitude towards BMW 728i. When having to select among alternatives, customers are interested in differences across brands in the same product

Government Influence: In China government plays an important role in auto parts supplier market. Local government implemented “localization tax” in order to improve domestic content rate of auto parts. As a result the overall bargaining power of suppliers was