The Power of the Customers in the Automobile Industry

1. The power of Customer
There are two categories of customers in the automobile industry: final customer, the actual users of the end product and industry’s customer, for instance manufacture company buying the necessary items from the supplier. The power of customer is the extent of an impact that the buyer has on a supplier or manufacturing business. Buyers are powerful if:
• Purchase of large volumes
• The product is standardized
• Low switching costs
• Price sensitive
• Threat of backward integration

1.1. Ultimate customer
Private customer is price sensitive. The cost of purchasing the car represents a significant percentage of consumer budget, therefore the price will become very important factor while choosing a product. Consumer will look for getting the optimal variant of the car for most favourable price. While searching for the preferable deal, there is an opportunity to access the necessary quantity and quality of information to compare different car models and manufacturers. Due to the Internet the availability of information has increased, therefore consumers can easily access different data, such as car price fluctuations, statistics, performance, ratings, etc.
Due to the changes in economical situation, consumer preferences and tastes, the demand for the cars is unstable. Therefore, the car manufacturers face the challenge to conform to changing demands quickly and meet the requirements in order to win the order. However, in some cases the particular company fails to keep up, as a result, the consumers become disappointed with offered products. Due to the low switching costs and quite standardized nature of product consumer has the possibility to search for alternatives. The report from American Consumer Satisfac...

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...ssibilities and capabilities and the most important, improved availability of supplies. However, backward integration also generates risks. Therefore before entering the new segment of a value chain the company shall do the analysis and evaluate if there are necessary resources, competence available.
Non-critical item is the next segment of the Kraljic’s matrix, which is used to illustrate the power of customer in the relationship between production company and supplier. The availability on the market for non-critical items is good also the value for the company is fairly low. This group of products is usually standardized, cheap and purchased in large-volumes. Therefore, the power of customer is very high. The manufacturer has the possibility to demand lower prices and higher quality, by creating a competition between suppliers and playing them against each other.