Global Automobile Industry in 2009

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 foundation for strategy formulation and implementation. Ultimately, in order to succeed, “a company must either fit its strategy to the external environment in which it operates or must be able to reshape the environment to its advantage through its chosen strategy” (Hill & Jones, 2012, p. 56).

Porter’s Five Forces Analysis –Competitive Rivalry

Rivalry between companies in an industry is the competitive struggle to gain market share. The extended rivalry that results from the interplay of Michael Porter’s five forces, which include rivalry among existing competitors, supplier power, buyer power, threat of new entrants, and threat of substitute products or services, “defines an industry and shapes the nature of competitive interaction within an industry” (Porter, 2008, p. 2). The intensity of rivalry among established companies within an industry is a product of industry competitive structure, demand conditions, cost conditions, and the height of exit barriers in the industry” (Hill & Jones, 2012,...

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...orter, 2008, p. 1). This could be accomplished through car maintenance, cleaning, fuel, and even insurance package deals that are good for the life of the vehicle, for example. A fourth strategic imperative for automakers is to further neutralize supplier power by producing interchangeable parts for vehicles or simply producing the parts themselves. These are just four examples of possible strategic imperatives that would reduce the intensity of Porter’s five forces and prepare competitors with the necessary strategy to remain viable within the industry.

References

Hill, C. W. L & Jones, G. R. (2012). Essentials of strategic management (3rd ed.). Mason, OH:

South-Western, Cengage Learning.

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review.

Boston, MA: Harvard Business School Publishing Corporation.