Porter five forces

Topics: Automotive industry, Audi, Volkswagen Group Pages: 8 (2043 words) Published: June 29, 2014


Porter five forces

Prepared by Dean

Content
1. Introduction
2. Explanation of the Porter Model
3. Porters five forces Automobile industry
4. Conclusion and weaknesses

1. Introduction
Audi History
It all began with August Horch, one of Germany's pioneering personalities automobile engineers. He set up business on his own in 1899, establishing Horch & Cie. Motorwagen Werke in Cologne on November 14 of that year. August Horch left the company in 1909 and immediately established a second car company in Zwickau. Because his surname was already in use and was protected by trademark, he chose its Latin translation for the new company. So "horch!" – or "hark" – became "audi!". The Audi brand established a tradition of sporting achievement from the very outset. Thanks to his victorious involvement in the Austrian Alpine Runs between 1911 and 1914, August Horch succeeded in making Audi internationally known within just a few years. The Audi four-ring emblem symbolises the merger in 1932 of four previously independent motor-vehicle manufacturers: Audi, DKW, Horch and Wanderer. In 1969 Auto Union GmbH amalgamated with NSU Motorenwerke AG. [1]

Audi Financial situation
The revenue in 2013 is 49,880 ERU million, which is higher than that in 2012(48,711 ERU million). Operating income in 2013 is 1,952 ERU million, which is also higher than 2012. With 1,575,480 Audi vehicles sold over the course of the past fiscal year (2013), the volume target of 1.5 million deliveries originally envisaged for 2015waseasilly Exceeded, two years ahead of schedule. [2]

The reason
I choose to analyze porter five forces of Audi, because I like the appearance of Audi SUV Q5 and Q7. And I deserve to own my car in the few years when I have enough money. Thus, for me, it has some help that I have the knowledge of the background. 2. Explanation of the Porter Model

Porter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit. This analysis is associated with its principal innovator Michael E. Porter of Harvard University (as of 2014).

3. Porters five forces Automobile industry
Barriers to Entry
Capital requirements
The amount of capital required to start a car company is enormous. For the average person, they can't come along and start manufacturing automobiles. As to build an auto firm, they need many factors like the site, labor and the support of technology, which be obtain by capital. Thus, the capital is the biggest factor for the creation of auto firm. Technology

Technology also is an import factor to build the auto firm. It is complicated not only for the auto firm itself, also for the parts suppliers. As we know, production of the cars can't complete by the auto firm, which has significant influence by the automotive suppliers. Meanwhile, ideas and technology that provides competitive advantage over others when patented, preventing others from using it and thus creates barrier to entry. Competition

There are already significant well established competitors. Globalization the tendency of world investment and businesses to move from national and domestic markets to a worldwide environment, is a huge factor affecting the auto market. Thus, many auto firms are able to compete with the others from domestic markets to the world. Competition will become more violent than the past. Government regulations and policies

Although government's job is to preserve free...
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