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Broad Analysis of Automotive Industry

Bryan Ellison Adam Nickles Sarah Whitaker Russ Hendrix

Bryan Ellison

on 16 September 2011

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Transcript of Broad Analysis of Automotive Industry

(Environmental Factor)
EPA and NHTSA are trying to reduce greenhouse gas emissions and emissions from automobiles
Clean air act of 1963
Government regulations on miles per gallon
-If it doesn’t fit standards a tax is imposed when a car is
purchased = Gas Guzzler Tax
Imposes restrictions on manufacturer’s designs Mgt 415 Group Project
Phase 1 Broad Environment
The automotive industry is an integral part of American culture and the backbone of its industrial might.
Detroit (automakers) find themselves tasked with the problem of solving the energy crisis caused by the cost and supply of oil.
Latest governmental mandate will force automakers to supply electric vehicles in order to have an average MPG (miles per gallon) rating which will meet the standards to avoid fines. Environmental Factors

Americans are not addicted to oil – what we are addicted to is the freedom to drive to the mall 20 miles away, work is 32 miles away and products we use everyday are supplied to the local markets and stores from all over the United States and the World.

Legislation by the government and the realization that we are going to have to cut back on oil consumption will force us to seek the holy grail of no fuel consumption. No matter the cost of fuel, Americans have it ingrained in us to have the freedom to get in our cars and drive.
Mobility is important and mass transit is lacking in providing an efficient way to get to and from activities. Work Related:
The average American drives 32 miles to work and back each day.

Most jobs are clustered with the bedroom communities being far away from the workplace.

Workplaces are spread out and are not centrally located, so that mass transportation is not a viable option. The average American family spends around
$4,000 to $7,000 dollars in gas a year. Transportation of Goods
From the food we eat to the clothes we wear, to the items we use each day most were made at a great distance from where we live. The truth is the transportation of goods and the American cultural bias is that we expect the items to be on the shelf ready for our consumption which means that the transportation of goods will not slow down. Alternative Options Natural Gas Hybrid Hydrogen Fuel Cells Smart Car What it boils down to is governmental legislation, cost and availability of fuels may drive us short-term, but the realization is that we only have so much oil in the world and alternative solutions must be oil-free. 2011 CTS- V Coupe = $2500 Gas Guzzler Tax Legislation
(Safety Factor)

Minimum safety and performance requirements imposed on
auto manufacturers

Conducts defect investigations which influences recalls
-Crash testing

Regulations on: head restraints, side impact, reflective devices, etc. Threats of New Entrants
(The potential for new firms to enter the market and pose a threat to existing firms)

Difficult to enter the industry due to:
Capital requirements
High capital requirements due to amounts of technology needed and Research & Development.
High costs for safety, motor management, comfort, design and electronic functions.
Increased costs influence the price the customers pay
No easy access, resource prices are increasing as of 2005
Wide strip steel up 41%
Aluminum up 55%
Copper has risen 174%
Existing customer loyalty
High focus on customer loyalty
Depend on lower marketing cost with high brand value.
Government regulations
High tariffs on imports
Regulations on safety and fuel efficiency Power of Suppliers

The threat that is imposed by using a supplier for a product or service. Raw materials, labor, intellectual property can all be jeopardized through increases in pricing or copying ones inputs.

-Many suppliers:
Brakes, frame, electrical, and engine.
Most suppliers are located in China.
-Manufacturer's typically rely on specific suppliers:
-Supplier power moderately low due to manufacturers ability to switch
Automakers buying in smaller quantities.
Looking to save money at every instance Power of the Buyer

The power a customer holds when deciding to purchase a product.
Price is a key influence to most buyers.
The power of the buyers is extremely high
Numerous alternatives
Price sensitive
Focus on quality/options Availability of Substitutes

The threat that a customer can switch to an existing substitute product already in the market typically influenced by

Threat of substitutes is extremely high
Switching auto manufacturers
Automakers are pushed to make more cars with many features to improve the vision of life for the automobile.
Look for more gas efficient cars
Taking public transportation
Cost of gas Competitive Rivalry
(The threat of actual competitors within the intended industry)

Very concentrated
Top 8 companies have 90% of global revenues
Competition with incentives and rebates
Free mileage Analysis

The automotive market overall is extremely competitive.

It is difficult to enter this developed industry

The buyers hold a great deal of power.
-Substitute of products

There are numerous regulations imposed.
-Environmental Selection of a Firm Type:

~General Motors~
Founded by William Durant on September 16, 1908 with the start of the Buick Motor Company.
GM has been around for over 100 years.
GM has been through a depression and many recessions.
GM was the largest auto-maker until 2008.
With the increase in Toyota recalls, GM is gradually regaining its' #1 spot. Citations

Lecture notes
Askville. Commuting Distance. ABC News. Internet.<http://askville.amazon.com/average-commuting-distance-americans/AnswerViewer.do?requestId=2554434> Date assessed May 24, 2011
Full transcript