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Porter’s 5-forces analysis

Honda Rivalry Among Competitors: Strong Force. Competition in the automobile industries is very high, as there are many firms in this industry that caters to many varieties of customers, so each firm try to do its best to make more profit than others, making its product more appealing and sellable in the market.

Threats of Substitutes: Weak Force. There is no huge threat of substitute in the automobile industry regarding utility, independence and efficient, even if there is a large variety of transportation, such as bicycles, subways, buses, trains, and airplanes. Those could make our life easier, but that can be less convenient than automobiles. The price of fuel affects the consumer’s decision to purchase vehicles, along with the maintenance and the insurance of the car, but the automobile will still be important in our personal and daily life.

Barriers to Entry: Weak Force. It is not easy for an entrant to enter into the automobile industry easily, because of the loyalty that the consumer has for the brand. It is important for recognized companies to have barriers to entry to protect themselves, as there are some companies are entering into foreign markets by buying an existing company or merging with it and making a large profit.

Buyers Bargaining Power: Strong Force consumers have many choices to choose from with a large number of brands out there, but the factors that affect the consumer to buy a certain brand from another are: appearance, quality, price, design. Consumers always want something new and nice looking with the latest technologies. The car has to be efficient, fuel-saving, and smooth.

Suppliers Bargaining Power: Weak Force there are many suppliers in the automobile industry, and there will be multiple suppliers fighting to be the one that the manufacturer buys their parts in bulk form. If the manufacturer chooses to switch suppliers, it will deal a devastating blow to the suppliers. Thus the manufacturers can switch suppliers freely, the suppliers hold little power.

Toyota Competitive Rivalry: Strong Force. Competition in the automobile industries is very high, as there are many firms in this industry that caters to many varieties of customers, so each firm try to do its best to make more profit than others, making its product more appealing and sellable in the market.

Buyers Bargaining Power: Strong Force. Customers are able to switch between Toyota and other firms at no extra cost. This change normally happens when a customer is purchasing a brand new car. Also, Toyota’s customers can choose their best option fairly easily because they have access to accurate information, such as product information from companies’ websites. Substitutes are available, but cars from firms like Toyota are still better in terms of convenience, as they are more well known. Toyota has to ensure that its products match the preferences of its target customers.

Suppliers Bargaining Power: Weak Force. There are many suppliers in the automobile industry, and there will be multiple suppliers fighting to be the one that the manufacturer buys their parts in bulk form. If the manufacturer chooses to switch suppliers, it will deal a devastating blow to the suppliers. Thus the manufacturers can switch suppliers freely, the suppliers hold little power.

The threat of Substitution: Moderate Force. It is quite easy for customers to shift from Toyota to substitutes. The substitutes are public transportation, bicycles and other modes of transportation. However, these substitutes are only moderately available. In some areas, substitutes are unable to be used, such as in some rural areas where public transportation is not available. These substitutes are less convenient than using the products of firms such as Toyota.

Thus Toyota makes its products more accessible, affordable and convenient. The threat of New Entry (Weak Force)The high costs of setting up and expanding a new firm in the industry are already entry barriers. These barriers weaken the new entrants affecting companies like Toyota. Thus, there is not much need to worry about the new entrants in the automobile industry. Nissan Industry rivalry: means the intensity of competition among the existing competitors in the market. The intensity of rivalry depends on the number of competitors and their capabilities. Each company is struggling to maintain their power through competitions. Industry rivalry for Nissan is high where customers have plenty of choices of cars in the market such as luxury cars, sports cars and many more. There is a number of equal or small competitors for Nissan such as Honda, Toyota and many more. The customer’s switching costs are also low where the industry is growing. In the automobile industry, the exit barriers are high so rivals stay and compete. These situations are the reasons for price wars, advertising wars, and product differentiation. The threat of new entry: relies on the entry and exit barriers. It is in a company’s interest to create barriers to prevent its competitors to enter to market. They are either new companies or companies which wish to diversify.

The arrival of new entrants also depends on the size of the market. Nissan is having a low threat of new entry where the automobile industry has high entry barriers and low exit barriers. For any Nissan competitor, there are significant barriers to entry such as high capital requirements to start the business, difficulties in finding and sourcing suppliers to build various components, high customer switching cost, and various differentiated products.

The threat of substitution: means how easily the customers can switch to the competitor’s product. The substitute products can be considered as an alternative compared to supply on the market. So substitutes are a threat to your company. The threat of substitute products of Nissan is moderate. Nissan certainly works to build a brand and there are Nissan loyalists, but there are many substitutes in the market for customers like Toyota, Honda, Hyundai and more as well as other modes of transportation. Customers of Nissan can easily find the product or services at the same or less price but with different technologies, branding and qualities. Different technologies, branding, and quality of Nissan’s products keep the threat of substitute to be moderate.

Bargaining Power of supplier: means how strong is the position of a seller and how much the supplier has control over increasing the price of supplies. Nissan has the limited bargaining power of supplier. Like all car companies, Nissan has some switching costs and transaction costs to switch suppliers, so the suppliers probably have some negotiating power, but it’s probably limited where Nissan has a very small number of suppliers around the world. For example, Nissan is an important customer to SynQuest where the contract with SynQuest has made to plan solutions with Penske Logistics providing the logistics design services and IBM, hardware infrastructure which offer integrated software and services for optimizing logistics chain. Bargaining Power of Buyers means how much control the buyers have to drive down the products price. Nissan’s customers have low buyer power. This is because the shopping cost for the product is high and. Besides, buyers are pretty fragmented around the world, and new cars can only be sold through authorized dealers, so buyers have relatively little power. Buyer’s bargaining power is low when offering a differentiated product. Nissan will not face a big crisis because the buyer power is low.

Porter’s 5-forces analysis defines the external environment and forces of Nissan. This will help Nissan in controlling their power and the external power to gain more profits and to stabilize their position in the marketplace.

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