Public Domain Ford Motor Company maintains its position as one of the biggest automobile manufacturers in the world by reforming its strategies to address the issues shown in this Five Forces analysis. Ford needs to develop policies and approaches that respond to the most significant forces based on the external factors in the global automotive industry. This Five Forces analysis of Ford Motor Company identifies the most important external factors and how they impact the business, thereby providing input for managerial decision-making.
Five external industry forces affecting an organization.
Porter in to understand how five key competitive forces are affecting an industry. The five forces identified are: These forces determine an industry structure and the level of competition in that industry. The stronger competitive forces in the industry are the less profitable it is.
An industry with low barriers to enter, having few buyers and suppliers but many substitute products and competitors will be seen as very competitive and thus, not so attractive due to its low profitability.
Threat of new entrants. This force determines how easy or not it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies.
When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when: Bargaining power of suppliers.
Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers.
Suppliers have strong bargaining power when: There are few suppliers but many buyers; Suppliers are large and threaten to forward integrate ; Few substitute raw materials exist; Suppliers hold scarce resources; Cost of switching raw materials is especially high.
Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs.
Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when: Buying in large quantities or control many access points to the final customer; Only few buyers exist; They threaten to backward integrate ; There are many substitutes; Buyers are price sensitive.
This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost. Rivalry among existing competitors.
This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when: There are many competitors; Industry of growth is slow or negative; Products are not differentiated and can be easily substituted; Competitors are of equal size; Low customer loyalty.
Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: For example, iTunes was created to complement iPod and added value for both products.
But how to use this tool? We have identified the following steps: Gather the information on each of the five forces Step 2. Analyze the results and display them on a diagram Step 3. Formulate strategies based on the conclusions Step 1.
Gather the information on each of the five forces. We have already identified the most important factors in the table below.Porter's 5 Forces in the Automobile Industry.
Porter's Five Forces, also known as P5F, is a way of examining the attractiveness of an industry. It does so by looking at five forces which act on that industry.5/5(1). Here is a five forces analysis of the automobile industry that discusses the five important forces which affect its competitiveness and attractiveness in any market.
This analytical model was developed by Michael E Porter and is used industry wide to keep track of competition and to generate a . Porter’s Five Forces and the Auto Industry Porter’s five major forces shaping all industries and structures are: the bargaining power of buyers, the bargaining power of suppliers, competitive rivalry in the industry, threats of new entrants and threats of substitutes (Porter, ).
Porter's 5 forces analysis for car service industry 1.
Prepared by: Chand Mohd NITK Surathkal 2. Evolution of Porter's Five Forces Model: Five forces is a framework for the industry analysis and business strategy development developed by Michael E.
Porter of Harvard Business School in Ford Motor Company: Five Forces Analysis (Porter’s Model) develop policies and approaches that respond to the most significant forces based on the external factors in the global automotive industry.
This Five Forces analysis of Ford Motor Company identifies the most important external factors and how they impact the business, thereby. Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level.