Transcript Chapter 1

Dominant Economic Traits in Auto Industry
Scope of the
Rivalry
Increasingly Global, W. Europe has 41% of Car
Market, NAFTA 50% of Commercial Vehicle Market
Market Size
1998 – 500 Million Vehicles on the Road, 49 Million
New Registrations
Number of
Competitors
Industry is Shrinking, Several mergers and
acquisitions; GM/Saab, Ford/Jaguar
Growth Rate (Units) 1998 (-2.7%), forecast for 1999 (-3.4%) and 2000
(-.1%). Forecast are low for 2002. Profits decreased
even with growth
Prevalence of
Backward
Integration
Partially integrated industry
Entry Barriers
Very High, Experience Curve, sizable economies of
scale, brand loyalty, large capital requirements,
access to distribution channels.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
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Dominant Economic Traits in Auto Industry
Exit Barriers
High Fixed Costs, Specialized Plants and
machinery to some degree, Shared facilities
Pace of Technology
Obsolescence is not really an issue because
of resale value and functionality.
Product and Customer
Characteristics
Segmented by Social Status and Value
Orientation. Most manufacturers have broad
product lines.
Capacity Utilization
Over capacity. U.S. - 80% capacity, W.
Europe – 70% capacity, Asian Mfgs. – 60%
Rapid Product
Innovation
Many innovations in the 1990’s , numerous
cooperation agreements. In ten years, timeto-market went from an average of 60 months
to 24 months.
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
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Drivers of Change in Auto Industry
Driver
Industry Effect
Slow Industry Growth
More Consolidation, Larger firms in better
position to reduce costs in production,
purchasing, and product development costs
Increasing Globalization
Requires an infrastructure to manufacture and
distribute vehicles internationally.
Technological Change
Encouraging more cooperative agreements
Suppliers Larger Role
Suppliers account for 69% of entire value.
Working in parallel with suppliers helps to
reduce time to market.
Increasing Government
Regulation
Concerns regarding safety, emissions, fuel
efficiency.
Increasing emphases on
reducing Costs
Mature market requires new features, but at
the same time manufacturers must be
concerned about costs
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
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Key Success Factors in Auto Industry
Technology-related
Product Innovation is required
Manufacturing-related
Low-Cost Production Efficiency is a must
Distribution-related
Requires a network of dealers to distribute
vehicles internationally.
Skills-related
Time-to-market is important
McGraw-Hill/Irwin
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
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