Porter's Five Force Model of Toyota

Topics: Automobile, Automotive industry, General Motors Pages: 2 (500 words) Published: January 26, 2012

Porter’s Five Forces Model Of Toyota

Porter’s five forces model is a framework for the industry analysis and development of business strategy. Three of Porter’s five forces refers to rivalry from external/outside sources such as micro environment, macro environment and rest are internal threats. It draws ahead Industrial Organization economics to develop five forces that conclude the competitive intensity and consequently attractiveness of a market place or industry. Attractiveness in this framework refers to the generally overall industry profitability. An "unattractiveness" in industry is one in which the mixture of these five forces proceed to constrain behind overall profitability. An extremely unattractive industry would be one moving toward "pure competition", in which existing profits for all companies are moving down to zero.

1.Bargaining power of suppliers

The bargaining power of suppliers is low. There are various types of suppliers in the vehicles industry, including the cooling system, electrical system, braking system and fuel supply system distributed across the globe. However, most vehicle manufactures own many interchangeable suppliers, and also have the ability to produce the components by their own in the short time. Thus, the suppliers do not own the power to change the price.

2.Bargaining power of buyers

The Bargaining power of buyers is high. Today, buyers have a lot of information channel, such as the internet, where can easily find the proper vehicle. And, the preferences of the private consumers are important to the vehicle corporations. If automobile Company increases one type, they can also choose other type or the cheaper one. And the vehicle’s buyers can easily find the substitutes, such as walking, and bus.

3.Threat of new entrants

The entrants can not enter to the automotive industry easily, as automobiles are special products that require a large amount of money on the design, electronic functions, and...
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