Porter’s Five Model for Tata Motors free essay sample

Threat of New entrants The threat of new entrants is very high for the small car industry. The growing economy and the increasing buying power of the customers has made every automobile player to grab the opportunity in small car segment. The norms for Foreign Investment and import of technology have been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive The industry had an investment of about Rs. 50,000 crore in 2002-03 which has gone up to Rs. 80,000 crore by the year 2007.The automotive industry has already attained a turnover of Rs. 1,65,000 crore (34 billion USD). At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological up gradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is allowed under automatic route in this sector With all the policies regarding the FDI and Tariff barriers as mentioned above, it has become easier for the foreign players to enter the Indian automobile industry. We will write a custom essay sample on Porter’s Five Model for Tata Motors or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Result: Threat of new entrants is HIGH, hence Industry attractiveness is LOW Threat of substitutes A product’s price elasticity is affected by the presence of substitutes as its demand is affected by the change in the substitute’s prices. The new technologies available also affect the demand of the product. Substitutes for the Tata already existed in the market from players like Maruti, General Motors, Mitshibushi, Hyundai, Honda, etc. Most of the car manufacturer has a product in this segment to defend their market share in terms of volume. Result: Threat of substitutes is HIGH, hence Industry attractiveness is LOW Bargaining power of suppliers Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This is done in order to capture profits from the market. The suppliers for this industry include the supply of raw materials like steel and a lot of components are involved in the Value chain process. Steel which is a major raw material for this industry is constantly increasing in price due to excess demand and availability.For a player like Tata the bargaining power of suppliers is less as it can get constant supply of steel and ancillary parts from its own units like Tata steel, subsidiary of Tata. Result: Bargaining power of suppliers is medium, hence Industry attractiveness is moderate Bargaining power of buyers It specifies the impact of customers on the product. When buyer power is strong, the buyer is the one who sets the price in the market. Price sensitive customers were some of the factors that determined the extent of influence of the buyers in this industry.The bargaining power doesn’t have major influence in current scenario as Nano doesn’t have direct alternative in its 600CC product category. But there is availability of substitutes for buyers in terms of vehicle utility and product other than Nano. Hence the bargaining power of buyers is medium. Result: Bargaining power of buyers is medium, hence Industry attractiveness is moderate Industry Rivalry Automobile industry in India is growing very rapidly with all major players having their manufacturing base and sales in India.This is a major threat to existing Indian automobile players. With 100% FDI allowed in Indian automobile sector, it is expected there will be more than 20% increase in export sales market. The industry rivalry is very intense from competitors like Maruti, Hyundai and Chevy having a good dominance in their small car segments and competitors like General Motors, Honda, Mitshibushi, Mahindra in their SUVs and Luxury car segment. Result: Threat from rivals is high, hence Industry attractiveness is low.