American University Abstract The following analysis focuses on the











American Automobile
Industry Analysis

Maurice Kirk

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ECON 600

American University




following analysis focuses on the American automotive industry, specifically,
on manufacturers of large variety automobiles. The automobile industry has very
intriguing: it is competitive, its vast inn size and is always changing with
the times. In the future it is projected the automotive industry would be the
most changed industry of our time.

analysis includes an Porter’s Five Forces Strategy Analysis as it applies to
the Auto Industry . The outcomes are very considerable when comes to this
market as a whole .




The automotive
industry is a wide
range of companies and organizations involved in the design, development,
manufacturing, marketing, and selling of motor vehicles, some of them are called automakers. It is one of the
world’s most important economic sectors by revenue. The automotive industry
does not include the industries that are dedicated to the upkeep of the automobile.
Such as places like repair shops and gas stations.




Market Structure


American Automotive Industry market structure solely effects the economy of
America in a major way. The oligopolistic market is the type of market that it belongs
to. An oligopoly is a market structure where a few firms dominate. Even though
a few firms dominate it is also possible that smaller firms can be a part of
the market.  In the American automobile industry,
it would be a couple big named car companies. These companies would be General Motors,
Ford and Chrysler. There are also a few foreign competitors in this market structure.
These companies include Toyota, Honda, Hyundai & Nissan.



Future Outlook


          The future outlook for
the American Automobile industry is good. This is due to the market of the industry
is constantly evolving and never remaining stagnant. The automotive industry
has never stayed the same. Even after the recession in 2009 the American automobile
industry continued to try flourish even with the bad economic situation that
was at hand.  Since has been a constant
trend with the growth and change to the American Automobile Industry the future
is projected to be good. There will be a lot of change that comes with it as well.
This is due to the demand in the economy of hybrid, gas alternatives, and fuel efficient
models of cars. Here is a chart of the projections for the future outlook of
the American Automobile Industry.



Porter’s Five Forces Strategy Analysis as it applies
to the Auto Industry

          The American Automotive industry
globally is a multi-billion-dollar industry, even though it is highly
competitive with a large number of competitors trying to leverage off the
advantages to gain majority or completely owned the market share. Here I will
discuss the key factors that are imperative for the American automotive
industry to be successful. Let’s now examine Porter’s Five Forces Strategy
analysis as it applies to the Auto Industry.



Bargaining Power of


Buyer power is the ability of individual
customers to negotiate prices that will profit from the seller. Private
individuals, commercial companies and governments are the primary buyers of
motor vehicles. Buyers have the ability to not make a choice on a decision. It
is different for the manufacturer of the product. Customers easily influence
the market by having the option to go to another dealer and their options not
being limited to one dealer.

The power of buyers is high. New customers like to explore their
options instead of making a decision on at one place. Also the price fluctuation
plays a major role by giving the customer (the buyer) different options. The
outcome is the effect is high buyer power.

Bargaining Power of


          The power of suppliers is solely based
on the demand of potential product in the industry. The cost is severely effected
because of the different options of the types of parts. Auto manufacturers require inputs-labor, parts,
raw materials and services. The cost of these inputs can have a significant
effect on profitability. Ford was depended on different suppliers for various
parts but soon it had the problem with the quality of equipment’s and
compatibility of parts made by different manufacturers became too expensive as
it was costing more comparing to buying from suppliers

          Several different suppliers
rely on 1 or 2 automakers for the purchase of supplies for their products. This
makes the suppliers hold not so much power. Which makes them dependable upon
the success and demand from the manufacture.

Competitive Rivalry in the Industry


With the rise of foreign competitors in the
1970’s and 80’s, rivalry in the automotive industry has become much more
intense as Firms compete on both prices and non-price dimensions. Serious competition
began to emerge in the 1990’s with a flood of new vehicles, designs and
concepts (Adam, Brock 2005.)

the market constantly changing means that competition is always among the rise.
The emergent rise of the foreign market requires the rivalry to increase. Japanese
competitors have leadership advantages due to the amount of technology they have.
This cost advantage is supreme to manufactory staying completive in this market.
All of these factors create a very high amount of rivalry in the industry.

Threat of New Entrants


          With the American Automobile market
there is a low threat of new entrants. This is due to the high barriers of
entry into the market. Also because the high amount to buy into the market of
this industry makes the threat of new entrants low as well. Lastly, the capabilities of safety, reliability
and durability are so noticeable it would
make it hard for a new entrant to compete. All of these factors make the threat
of new entrant very low.


 Threat of Substitutes


          The threat of substitutes does exist.
There are several factors to make this true. Increasing fuel prices are causing
customers to consider public transportation. If this trend increase, then there
will increase in the public transportation market instead of personal automobiles.

          There is no realistic substitute just
yet but it the future this may become a problem to take in consideration. With
the increase of Uber, Lyft, and other forms of transportation it might threaten
the market for personal automobile use by customers. As for now the threat of substitutes
if moderate.




In closing, I believe that analysis has been proven to be successful.
As an outcome to shows that there are several things that can hinder the market
as well help it succeed. It is all about how those things are implemented in
the American Automobile industry. Overall I believe the market is in a good
place and there is room for improvement.




Retrieved 1 January 2018, from

Retrieved 1 January 2018, from

The US Auto Industry in 2013: Five Forces to
Consider. (2018).
Retrieved 1 January 2018, from